Information, Trading, and Volatility: Evidence from Firm-Specific News

54 Pages Posted: 25 Dec 2012 Last revised: 1 Dec 2017

See all articles by Jacob Boudoukh

Jacob Boudoukh

Interdisciplinary Center (IDC) Herzliyah; AQR Capital Management, LLC

Ronen Feldman

Hebrew University of Jerusalem - Jerusalem School of Business Administration

Shimon Kogan

Massachusetts Institute of Technology (MIT) - Sloan School of Management; IDC Herzliya - Arison School of Business

Matthew P. Richardson

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Multiple version iconThere are 2 versions of this paper

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

Boudoukh, Jacob and Feldman, Ronen and Kogan, Shimon and Richardson, Matthew P., Information, Trading, and Volatility: Evidence from Firm-Specific News (February 22, 2016). Available at SSRN: https://ssrn.com/abstract=2193667 or http://dx.doi.org/10.2139/ssrn.2193667

Jacob Boudoukh

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Ronen Feldman

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905
Israel

Shimon Kogan (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

77 Massachusetts Ave. E62-663
Cambridge, MA 02142
United States

IDC Herzliya - Arison School of Business ( email )

P.O. Box 167
Herzliya, 46150
Israel

Matthew P. Richardson

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
212-998-0349 (Phone)
212-995-4233 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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