Does more information in stock price lead to greater or smaller idiosyncratic return volatility?
- Authors
- Lee, Dong Wook; Liu, Mark H.
- Issue Date
- 6월-2011
- Publisher
- ELSEVIER SCIENCE BV
- Keywords
- Idiosyncratic volatility; Noisy rational expectations equilibrium; Price informativeness
- Citation
- JOURNAL OF BANKING & FINANCE, v.35, no.6, pp.1563 - 1580
- Indexed
- SSCI
SCOPUS
- Journal Title
- JOURNAL OF BANKING & FINANCE
- Volume
- 35
- Number
- 6
- Start Page
- 1563
- End Page
- 1580
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/112386
- DOI
- 10.1016/j.jbankfin.2010.11.002
- ISSN
- 0378-4266
- Abstract
- We investigate the relation between price informativeness and idiosyncratic return volatility in a multi-asset, multi-period noisy rational expectations equilibrium. We show that the relation between price informativeness and idiosyncratic return volatility is either U-shaped or negative. Using several price informativeness measures, we empirically document a U-shaped relation between price informativeness and idiosyncratic return volatility. Our study therefore reconciles the opposing views in the following two strands of literature: (1) the growing body of research showing that firms with more informative stock prices have greater idiosyncratic return volatility, and (2) the studies arguing that more information in price reduces idiosyncratic return volatility. (C) 2010 Elsevier B.V. All rights reserved.
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Collections - Korea University Business School > Department of Business Administration > 1. Journal Articles
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