Information uncertainty and investors’ under-reaction

This study investigates the relation between information uncertainty and investors’ under reaction, in other words, whether information uncertainty results in higher investors' under-reaction which is one of the abnormalities of efficient capital market. The sample includes 106 firms listed in Tehran Stock Exchange over the period from 2007 to 2011. We used a sample of 106 companies to test hypotheses. In this research, we used abnormal return volatility, earning forecast dispersion, and earning forecast error as three proxies for measuring information uncertainty. These three criterions are weighted by using factor analysis method and applied as one single factor. We used Equality of Tow Means Test for statistical analysis of research hypothesis. The results indicate that information uncertainty has a positive relationship with investors’ under-reaction.