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The Impact of News on Measures of Undiversifiable Risk: Evidence from the UK Stock Market

33 Pages Posted: 18 Jun 2002  

Chris Brooks

University of Reading - ICMA Centre

Olan T. Henry

University of Melbourne - Department of Economics

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Abstract

Using UK equity index data, this paper considers the impact of news on time varying measures of beta, the usual measure of undiversifiable risk. The results suggest that beta depends on two sources of news - news about the market and news about the sector. The asymmetric effect in beta is consistent across all sectors considered. Recent research provides conflicting evidence as to whether abnormalities in equity returns are a result of changes in expected returns in an efficient market or an over-reaction to new information. The evidence in this paper suggests that such abnormalities may occur as a result of changes in expected return caused by time-variation and symmetry in beta.

Keywords: Stock Index, Multivariate Asymmetric GARCH, News Impact Surfaces, Conditional Beta Surfaces

JEL Classification: G12, G15

Suggested Citation

Brooks, Chris and Henry, Olan T., The Impact of News on Measures of Undiversifiable Risk: Evidence from the UK Stock Market. EFMA 2002 London Meetings. Available at SSRN: https://ssrn.com/abstract=314363 or http://dx.doi.org/10.2139/ssrn.314363

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

Olan T. Henry

University of Melbourne - Department of Economics ( email )

Victoria 3010, 3010
Australia
+613 3 8344 5312 (Phone)
+613 3 8344 6899 (Fax)

HOME PAGE: http://melbecon.unimelb.edu.au/staffprofile/ohenry/home.html

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