Public Information Arrival and Stock Return Volatility: Evidence from News Sentiment and Markov Regime-Switching Approach

42 Pages Posted: 8 Jul 2014

See all articles by Yanlin Shi

Yanlin Shi

Macquarie University

Kin-Yip Ho

The Australian National University - School of Finance, Actuarial Studies and Applied Statistics, College of Business and Economics

Wai-Man Liu

Australian National University

Date Written: July 1, 2013

Abstract

Using computational linguistic analysis of intraday firm-level news releases, this study models the relationship between public information flows and stock volatility under different regimes. We analyze how the hourly return volatility of S&P100 stocks from 2000-2010 are linked to the various linguistics-based sentiment scores of the news releases, which are obtained from the RavenPack News Analytics Database. Results from the Markov Regime-Switching GARCH (MRS-GARCH) model indicate that firm-specific news sentiment is more significant in quantifying intraday volatility persistence in the calm (low-volatility) state than the turbulent (high-turbulent) state. Furthermore, the impact of news sentiment differs across industries and firm size.

Keywords: Public Information Arrival, Stock Return Volatility, News Sentiment, Markov Regime-Switching GARCH

JEL Classification: G14, C52

Suggested Citation

Shi, Yanlin and Ho, Kin-Yip and Liu, Wai-Man, Public Information Arrival and Stock Return Volatility: Evidence from News Sentiment and Markov Regime-Switching Approach (July 1, 2013). Available at SSRN: https://ssrn.com/abstract=2463531 or http://dx.doi.org/10.2139/ssrn.2463531

Yanlin Shi (Contact Author)

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Kin-Yip Ho

The Australian National University - School of Finance, Actuarial Studies and Applied Statistics, College of Business and Economics ( email )

Canberra, Australian Capital Territory 0200
Australia

Wai-Man Liu

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

HOME PAGE: http://https://www.cbe.anu.edu.au/about/staff-directory/?profile=Wai-Man%20(Raymond)-Liu

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