Yang, Yung Chiang 
ORCID: 0000-0002-5844-4515, Zhang, Bohui and Zhang, Chu
(2020)
Is information risk priced? Evidence from abnormal idiosyncratic volatility
Journal of Financial Economics, 135 (2).
pp. 528-554.
ISSN 0304-405X
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Yang - Is Information Risk priced..............pdf - Author Accepted Manuscript Download (583kB) | Preview |
Abstract
We propose a new, price-based measure of information risk called abnormal idiosyncratic volatility (AIV) that captures information asymmetry faced by uninformed investors. AIV is the idiosyncratic volatility prior to information events in excess of normal levels. Using earnings announcements as information events, we show that AIV is positively associated with informed return run-ups, abnormal insider trading, short selling, and institutional trading during pre-earnings-announcement periods. We find that stocks with high AIV earn economically and statistically larger future returns than stocks with low AIV. Taken together, our findings support the notion that information risk is priced.
| Item Type: | Article |
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| Uncontrolled Keywords: | Information risk, Idiosyncratic volatility, Earnings announcement, Expected returns |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 23 Sep 2020 09:21 |
| Last Modified: | 28 Feb 2026 16:47 |
| DOI: | 10.1016/j.jfineco.2019.06.013 |
| Related Websites: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3102190 |
| Disclaimer: | The University of Liverpool is not responsible for content contained on other websites from links within repository metadata. Please contact us if you notice anything that appears incorrect or inappropriate. |
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