Earnings uncertainty linked to stock price changes in groundbreaking study.
The study looked at how uncertainty in analysts' earnings forecasts affects the relationship between unexpected returns and unexpected earnings. They used data from over 3,000 firms over six years and found that higher uncertainty in earnings forecasts leads to a stronger impact of earnings news on stock prices. In simpler terms, when analysts are less certain about a company's earnings, any new information about those earnings has a bigger effect on the company's stock price.