Information Arrival, News Sentiment, Volatilities and Jumps of Intraday Returns

29 Pages Posted: 9 Jan 2021

See all articles by Ya Qian

Ya Qian

Humboldt University of Berlin

Jun Tu

Singapore Management University

Alla Petukhina

HTW Berlin; Humboldt University of Berlin - Institute for Statistics and Econometrics

Zilin Chen

Southwestern University of Finance and Economics (SWUFE) - School of Finance

Date Written: July 7, 2019

Abstract

This work aims to investigate the (inter)relations of information arrival, news sentiment, volatility and jump dynamics of intraday returns. Two parametric GARCHtype jump models which explicitly incorporate both news arrival and news sentiment variables are proposed, among which one assumes news affecting financial markets through the jump component while the other postulating the GARCH component channel. In order to give the most-likely format of the interactions between news arrival and stock market behaviours, these two models are compared with several other widely used versions of GARCH-type models based on the calibration results on DJIA 30 stocks. The necessity to include news processes in intraday stock volatility modelling is justified in our specific calibration samples (2008 and 2013, respectively). However, our results reject higher profitability of separate jump process modelling compared to a simple GARCH process with error distribution capable of capturing fat tail behaviours of financial time series, what allows to avoid the complicatedness of modelling. Thus, our empirical results suggest GARCH-news model with skew-t innovation distribution as the best candidate for intraday returns of large stocks in the US market.

Keywords: information arrival, volatility modelling, jump, sentiment, GARCH

JEL Classification: C52, C55, C58, G14

Suggested Citation

Qian, Ya and Tu, Jun and Petukhina, Alla and Petukhina, Alla and Chen, Zilin, Information Arrival, News Sentiment, Volatilities and Jumps of Intraday Returns (July 7, 2019). Available at SSRN: https://ssrn.com/abstract=3724814 or http://dx.doi.org/10.2139/ssrn.3724814

Ya Qian

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, Berlin 10099
Germany

Jun Tu

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

Alla Petukhina (Contact Author)

HTW Berlin ( email )

Treskowallee 8
Berlin, 10313
Germany

Humboldt University of Berlin - Institute for Statistics and Econometrics ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Zilin Chen

Southwestern University of Finance and Economics (SWUFE) - School of Finance ( email )

Chengdu, 610074
China

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