This is an interesting article on warrants. It found that the warrants had consistently higher implied volatilities than exchange traded calls of similar maturities. It concluded that this was because warrants were often held by small investors who were not able to set up option accounts, and because when one shorts a warrant, one has to deliver the warrant on expiration, as opposed to delivering the underlying stock. This can cause a short squeeze on the warrants.

This article creates a model where the positive correlation among stocks, during a market crash, causes the stock index options market, to have a higher slope for implied volatilities.

This articles explains the skew with a risk premium model.

This article asserts that growth stocks are more more harmed by negative earning surprises than other stocks. ie. the return distribution is an increasing function of earnings, with the negative side of the function having a more negative slope, than the positive side. It also says that pre earnings anouncements are important, and that if earnings are pre anounced then the actual anouncement is much less important.

Capital Ideas Revisited part 2 by Michael Mauboussin discuss effecient market theory, and argues that information is costly, and therefor investors can expect higher returns who use difficult to obtain information

Stock returns, aggregate earnings surprises, and behavioral finance by Kothari, Jonathan Lewellen and Jerold B. Warner. This paper looks at the returns of stock indexes as a function of previous earnings. It finds a negative relationship, that when stocks earn higher than trend, that the market underperforms, and vice versa, when stocks are reporting less than previously reported, the market over performs. They do not consider earnings performance relative to expectations, but only in relation to previous earnings.

Earnings Surprise Materiality as Measured by Stock Returns by W Kinney, D Burgstahler, R Martin. This papers measures a very weak relation ship between earnings surprises and the probability of profiting from prior knowledge of the earnings surprise. Given perfect foreknowledge of an earnings, they measured only a 62 percent chance of profiting from an earnings surprise. They attributed this in part because the distribution of analyst predicitions could have a large variance, and be non normal. They also attributed this to the high volatility of returns after wards. They found an S shaped curve when mapping earnings as a function of earnings surprise. Which is to say, a moderately positive earnings surprise was associated with a larger stock return then a large earnings surprise.

To warn or not to warn by Kasznik, Ron and Lev, Baruch. Less than ten percent of our large-surprise firms published quantitative earnings or sales forecasts, while 50 percent of the firms kept silent. Firms facing earnings disappointments were more likely to make a disclosure, and larger disappointments were preceded more often by "harder" (more quantitative and earnings-related) warnings. We found the likelihood of warnings to be positively associated with firm size, the existence of a previous forecast, and membership in a high technology industry. Finally, warnings tend to be issued for permanent earnings disappointments, while transitory disappointments are more likely to occur without prior warning.

Big cap tech firms with a high volatility, lots of analyst and lots of trading volume, were the most likely to give warnings of bad news.

Earnings Yield and Stock Return by Basu, Sanjoy. The empirical relationship between earnings' yield, firm size and returns on the common stock of NYSE firms is examined in this paper. The results confirm that the common stock of high E/P firms earn, on average, higher risk-adjusted returns than the common stock of low E/P firms and that this effect is clearly significant even if experimental control is exercised over differences in firm size. On the other hand, while the common stock of small NYSE firms appear to have earned substantially higher returns than the common stock of large NYSE firms, the size effect virtually disappears when returns are controlled for differences in risk and E/P ratios.