Abstract

http://ssrn.com/abstract=262096
 
 

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Measuring and Testing the Impact of News on Volatility


Robert F. Engle


New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER); New York University (NYU) - Department of Finance

Victor K. Ng


International Monetary Fund (IMF) - Research Department; National Bureau of Economic Research (NBER)

April 1991

NBER Working Paper No. w3681

Abstract:     
This paper introduces the News Impact Curve to measure how new information is incorporated into volatility estimates. A variety of new and existing ARCH models are compared and estimated with daily Japanese stock return data to determine the shape of the News Impact Curve. New diagnostic tests are presented which emphasize the asymmetry of the volatility response to news. A partially non-parametric ARCH model is introduced to allow the data to estimate this shape. A comparison of this model with the existing models suggests that the best models are one by Glosten Jaganathan and Runkle (GJR) and Nelson's EGARCE. Similar results hold on a pre-crash sample period but are less strong.

Number of Pages in PDF File: 32

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Date posted: June 18, 2004  

Suggested Citation

Engle, Robert F. and Ng, Victor K., Measuring and Testing the Impact of News on Volatility (April 1991). NBER Working Paper No. w3681. Available at SSRN: http://ssrn.com/abstract=262096

Contact Information

Robert F. Engle (Contact Author)
New York University - Leonard N. Stern School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
New York University (NYU) - Department of Finance
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
Victor K. Ng
International Monetary Fund (IMF) - Research Department ( email )
700 19th Street NW
Washington, DC 20431
United States
202-623-7671 (Phone)
202-623-6339 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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