Information, Trading, and Volatility: Evidence from Firm-Specific News
54 Pages Posted: 25 Dec 2012 Last revised: 1 Dec 2017
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Information, Trading, and Volatility: Evidence from Firm-Specific News
Which News Moves Stock Prices? A Textual Analysis
Date Written: February 22, 2016
Abstract
What moves stock prices? Prior literature concludes that the revelation of private information through trading, and not public news, is the primary driver. We revisit the question by using textual analysis to identify fundamental information in news. This information accounts for 49.6% of overnight idiosyncratic volatility (compared to 12.4% during trading hours), with a considerable fraction due to days with multiple news types. As applications, we use our measure of public information arrival to reinvestigate two seminal works in the literature related to individual R2s of stock returns on aggregate factors, namely Roll (1988) and Morck, Yeung and Yu (2000).
Keywords: text analysis, excess volatility, roll R2, information and asset prices.
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
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