Idiosyncratic Volatility , Fundamentals , and Institutional Herding : Evidence from the Japanese Stock Market

@inproceedings{Chang2004IdiosyncraticV,
  title={Idiosyncratic Volatility , Fundamentals , and Institutional Herding : Evidence from the Japanese Stock Market},
  author={Eric Chung-Hui Chang},
  year={2004}
}
We offer evidence that variations in firm idiosyncratic volatility are related to both behavior and fundamental factors. Using Japanese data from 1975 to 1999, we document that both institutional herding and the absolute value of firm earnings are positively related to idiosyncratic volatility. We find that institutional herding explains about 10% of the cross-sectional variation in idiosyncratic volatility, more than firm earnings, which account for less than 1%. Moreover, we reject the… CONTINUE READING

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