Management Forecasts, Idiosyncratic Risk, and Information Environment

Norio Kitagawa and Shin' ya Okuda
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Norio Kitagawa: Graduate School of Business Administration, Kobe University
Shin' ya Okuda: Distribution and Communication Sciences, Osaka Gakuin University

No 2013-38, Discussion Papers from Kobe University, Graduate School of Business Administration

Abstract: Studies have identified an increase in the level of average stock return volatility. In this paper, we use the management forecast error as a proxy for disclosure quality to investigate the relationship between management forecast errors and idiosyncratic risk, as management forecasts are important information source on the Japanese stock market. We find that management forecast error is positively related to idiosyncratic risk, suggesting that high-quality public information reduces idiosyncratic risk. Furthermore, we present evidence that management forecast error is even more positively related to the idiosyncratic risks in relatively bad information environments.

Keywords: Management forecasts; idiosyncratic risk; information environment; quality of disclosure; Japanese stock market (search for similar items in EconPapers)
JEL-codes: G12 G14 M41 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2013-05, Revised 2013-07
New Economics Papers: this item is included in nep-cta and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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