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The Impact of Macroeconomic News on Quote Adjustments, Noise, and Informational Volatility

44 Pages Posted: 16 Feb 2009 Last revised: 31 Mar 2012

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research; Center for Financial Studies (CFS)

Dieter Hess

University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)

David Veredas

Vlerick Business School

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Date Written: January 17, 2010

Abstract

We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. Bid and ask returns are decomposed into a common (''efficient return'') factor and two market-side-specific components capturing market microstructure effects. The corresponding variance components reflect information-driven and noise-induced volatilities. We find that all volatility components reveal distinct dynamics and are positively influenced by news. The proportion of noise-induced variances is highest before announcements and significantly declines thereafter. Moreover, news-affected responses in all volatility components are influenced by order flow imbalances.

Keywords: Efficient return, macroeconomic announcements, microstructure noise, informational volatility

JEL Classification: C32, G14, E44

Suggested Citation

Hautsch, Nikolaus and Hess, Dieter and Veredas, David, The Impact of Macroeconomic News on Quote Adjustments, Noise, and Informational Volatility (January 17, 2010). Available at SSRN: https://ssrn.com/abstract=1343297 or http://dx.doi.org/10.2139/ssrn.1343297

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Dieter Hess (Contact Author)

University of Cologne - Department of Corporate Finance ( email )

Corporate Finance Seminar
Albertus-Magnus-Platz
D-50923 Cologne
Germany
+49 221 470 7876 (Phone)
+49 221 470 7466 (Fax)

HOME PAGE: http://cf.uni-koeln.de/

University of Cologne - Centre for Financial Research (CFR)

Germany

David Veredas

Vlerick Business School ( email )

Library
REEP 1
Gent, BE-9000
Belgium

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