Idiosyncratic Return Volatility and the Information Quality Underlying Managerial Discretion

45 Pages Posted: 30 Jul 2011

See all articles by Alan Guoming Huang

Alan Guoming Huang

University of Waterloo

Changling Chen

University of Waterloo - School of Accounting and Finance

Ranjini Jha

University of Waterloo - School of Accounting and Finance

Date Written: April 29, 2011

Abstract

Variation in idiosyncratic return volatility from 1978 to 2009 is attributable to discretionary accrual volatility and the correlation between pre-managed 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 highlight the importance of managerial discretion in determining idiosyncratic volatility.

Keywords: Idiosyncratic return volatility, operating uncertainty, managerial discretion, information quality

JEL Classification: G14, M41, G12

Suggested Citation

Huang, Alan G. and Chen, Changling and Jha, Ranjini, Idiosyncratic Return Volatility and the Information Quality Underlying Managerial Discretion (April 29, 2011). Journal of Financial and Quantitative Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1898706

Alan G. Huang (Contact Author)

University of Waterloo ( email )

School of Accounting and Finance
Waterloo, Ontario N2L 3G1
Canada
519-888 4567 ext. 36770 (Phone)

Changling Chen

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Ranjini Jha

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

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