Journal article
The Information Content of Idiosyncratic Volatility
Journal of financial and quantitative analysis, Vol.44(1), pp.1-28
02/01/2009
DOI: 10.1017/S0022109009090073
Abstract
Ang, Hodrick, Xing, and Zhang (2006a) show that stocks with high idiosyncratic return volatility tend to have low future returns. This paper further documents that idiosyncratic volatility is inversely related to future earning shocks, and more importantly, that the return-predictive power of idiosyncratic volatility is induced by its information content about future earnings. We examine various explanations of the triangular relation among idiosyncratic volatility, future earning shocks, and future stock returns. Our results show that the idiosyncratic volatility anomaly is not a simple manifestation of previously documented market anomalies related to excessive extrapolation on firm growth, over-investment tendency, accounting accruals, or investor underreaction to earnings news. On the other hand, there is evidence that the idiosyncratic volatility anomaly is related to corporate selective disclosure, and the anomaly is stronger among stocks with a less sophisticated investor base.
Details
- Title: Subtitle
- The Information Content of Idiosyncratic Volatility
- Creators
- George J. Jiang - University of ArizonaDanielle Xu - Gonzaga UniversityTong Yao - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of financial and quantitative analysis, Vol.44(1), pp.1-28
- Publisher
- Cambridge University Press
- DOI
- 10.1017/S0022109009090073
- ISSN
- 0022-1090
- eISSN
- 1756-6916
- Number of pages
- 28
- Language
- English
- Date published
- 02/01/2009
- Academic Unit
- Finance
- Record Identifier
- 9984380412402771
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