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Idiosyncratic Return Volatility and the Information Quality Underlying Managerial Discretion

Published online by Cambridge University Press:  23 February 2012

Changling Chen ,
Alan Guoming Huang  and
Ranjini Jha
Changling Chen
Affiliation:
clchen@uwaterloo.ca
Alan Guoming Huang
Affiliation:
aghuang@uwaterloo.ca
Ranjini Jha
Affiliation:
rjha@uwaterloo.ca, School of Accounting and Finance, University of Waterloo, Waterloo, ON, N2L 3G1, Canada
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Abstract

Variation in idiosyncratic return volatility from 1978 to 2009 is attributable to discretionary accrual volatility and the correlation between premanaged earnings and discretionary accruals reflective of information quality across firms. These results are robust to controls for firm operating uncertainty, growth options, business-cycle variations, and firm age and industry effects, and they highlight the importance of managerial discretion in determining idiosyncratic volatility.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 47 , Issue 4 , August 2012 , pp. 873 - 899
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2012

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