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

Posted: 20 Nov 2011 Last revised: 31 Mar 2012

See all articles by Nikolaus Hautsch

Nikolaus Hautsch

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

Dieter Hess

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

David Veredas

Vlerick Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 16, 2009

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. We decompose bid and ask returns 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 (February 16, 2009). Journal of Banking and Finance, Vol. 35, No. 10, 2011. Available at SSRN: https://ssrn.com/abstract=1962064

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

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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

Register to save articles to
your library

Register

Paper statistics

Abstract Views
398
PlumX Metrics