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Management Forecasts, Idiosyncratic Risk, and Information Environment

Author

Listed:
  • Norio Kitagawa

    (Graduate School of Business Administration, Kobe University)

  • Shin' ya Okuda

    (Distribution and Communication Sciences, Osaka Gakuin University)

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.

Suggested Citation

  • Norio Kitagawa & Shin' ya Okuda, 2013. "Management Forecasts, Idiosyncratic Risk, and Information Environment," Discussion Papers 2013-38, Kobe University, Graduate School of Business Administration, revised Jul 2013.
    • Handle: RePEc:kbb:dpaper:2013-38
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    File URL: https://www.b.kobe-u.ac.jp/papers_files/2013_38.pdf
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    References listed on IDEAS

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    2. Venessa S. Tchamyou & Simplice A. Asongu & Jacinta C. Nwachukwu, 2018. "Effects of asymmetric information on market timing in the mutual fund industry," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 14(5), pages 542-557, May.

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    More about this item

    Keywords

    Management forecasts; idiosyncratic risk; information environment; quality of disclosure; Japanese stock market;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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