We document a significant positive relation between earnings announcement idiosyncratic volatility and stock returns in the 10-day window before future earnings announcements. The average of risk-adjusted return differences between stocks with the highest earnings announcement idiosyncratic...

We document a significant positive relation between earnings announcement idiosyncratic volatility and stock returns in the 10-day window before future earnings announcements. The average of risk-adjusted return differences between stocks with the highest earnings announcement idiosyncratic...

Recent evidence (Stambaugh, Yu, and Yuan, 2015) indicates that the most promising explanation for the negative price of idiosyncratic volatility is from its function as a limit arbitrage. Our evidence incorporating firm specific news is inconsistent with the limited arbitrage explanation. Since...

We explore the link between credit and equity markets by considering the informational content of the term structure of credit spreads. A shallower credit term structure predicts decreases in default risk, increases in future profitability, as well as favorable earnings surprises. Further, the...