Earnings volatility, ambiguity, and crisis-period stock returns Academic Article uri icon


  • 2018 Accounting and Finance Association of Australia and New Zealand Financial crises are marked by substantial increases in ambiguity where prices appear to decouple from fundamentals. Consistent with ambiguity-based asset pricing theories, we find that ambiguity concerns are more severe for firms with higher earnings volatility, causing investors to demand a higher ambiguity premium for such firms. While there is no relation between earnings volatility and stock returns under normal conditions, there is a significant negative relation between crisis-period stock returns and prior earnings volatility. The effect is stronger in firms with low institutional ownership and low analyst following, consistent with ambiguity concerns being greatest amongst firms with unsophisticated investors.

published proceedings


altmetric score

  • 1.35

author list (cited authors)

  • Ahmed, A. S., McMartin, A. S., & Safdar, I.

citation count

  • 6

complete list of authors

  • Ahmed, Anwer S||McMartin, Andrew S||Safdar, Irfan

publication date

  • September 2020