Berrada, TonyHugonnier, Julien2013-04-192013-04-192013-04-19201210.1016/j.jbankfin.2012.09.004https://infoscience.epfl.ch/handle/20.500.14299/91642WOS:000312979100015When investors have incomplete information, expected returns, as measured by an econometrician, deviate from those predicted by standard asset pricing models by including a term that is the product of the stock's idiosyncratic volatility and the investors' aggregated forecast errors. If investors are biased this term generates a relation between idiosyncratic volatility and expected stocks returns. Relying on forecast revisions from IBES, we construct a new variable that proxies for this term and show that it explains a significant part of the empirical relation between idiosyncratic volatility and stock returns. (C) 2012 Elsevier B.V. All rights reserved.Idiosyncratic volatilityIncomplete informationCross-section of stock returnstext::journal::journal article::research article