The ambiguous December

This study documents a seasonality in capital market ambiguity. It shows that ambiguity tends to increase along the calendar year. Moreover, December records an exceptionally high level of ambiguity. In half of the sample years, December exhibits the highest or the second-highest ambiguity among all months. This pattern is not found for the volatility index (VIX). The “December Ambiguity Effect” is robust to numerous tests and persists after controlling for macroeconomic parameters. A possible explanation for this effect is the obsoleteness of information disclosed at the beginning of the year by firms with December fiscal year-end.