EXPLORING THE LINK BETWEEN INFORMATION QUALITY AND SYSTEMATIC RISK

Charlie X. Cai, Robert William Faff, David Hillier and Suleiman Mohamed

Journal of Financial Research, 2007, vol. 30, issue 3, pages 335-353

Abstract: We examine the effect of information quality around earnings announcements and insider trading events on equity systematic risk. Our results indicate that observed systematic risk significantly increases after these events. Consistent with the insights provided by our framework, the change in systematic risk is increasing in the ratio of event-related to pre-event information quality. Our results have implications for all empirical work attempting to model security returns around firm and macroeconomic announcements. 2007 The Southern Finance Association and the Southwestern Finance Association.

Date: 2007

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