Abstract
The purpose of this research is investigating the effect of earning quality on idiosyncratic return volatility in the companies listed in Tehran Stock Exchange. For investigating this relationship; we use data for 69 listed companies on Tehran Stock Exchange for period of 2001-2010. In this research, we use earnings quality index based on Squared abnormal accruals ( ) to measure Earning Quality and three-factor model of Fama and French (1993) to calculate the idiosyncratic return volatility. For data analysis we employ the linear multiple regression with use of panel data. The results show that earning quality has the inverse effect on idiosyncratic return volatility. Results of the research also indicate that annual stock return and operating cash flow of next year have direct effect and firm size has inverse effect on idiosyncratic return volatility.
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