Public Information Arrival and Volatility of Intraday Stock Returns
Posted: 26 Jun 2003 Last revised: 14 Feb 2014
Date Written: December 19, 2002
This study employs firm-specific announcements as a proxy for information flows and investigates the information-volatility relation using high-frequency data from the Australian Stock Exchange. Our analysis reveals a positive and significant impact of the arrival rate of the selected news variable on the conditional variance of stock returns, even after controlling for the potential effects of trading volume and high opening volatility. Furthermore, the inclusion of the news variable in the conditional variance equation of the generalized autoregressive conditional heteroscedastic model also reduces volatility persistence, especially with intraday data. Combined with the evidence that news arrivals display a very strong pattern of autocorrelation, our results are consistent with the Mixture of Distribution Hypothesis, which attributes conditional heteroscedasticity of stock returns to time-dependence in the news arrival process.
Keywords: ARCH, Public Information Arrival, Mixture of Distribution Hypothesis, Trading Volume, Volatility Persistence
JEL Classification: G14
Suggested Citation: Suggested Citation