News sentiment and states of stock return volatility: Evidence from long memory and discrete choice models

Yanlin Shi and Kin-Yip Ho

Finance Research Letters, 2021, vol. 38, issue C

Abstract: This paper examines the impact of public news sentiment on volatility states of firm-level returns. We firstly propose a Markov regime switching fractionally integrated exponential GARCH (MRS-FIEGARCH) model, which is employed to estimate the latent volatility states of intraday stock return. By using the new RavenPack Dow Jones News Analytics database, we fit discrete choice models to investigate the impact of news sentiment on changes of volatility states of the constituent stocks in the Dow Jones Composite Average. Our results demonstrate that sentiments of macroeconomic and firm-specific news can significantly influence the likelihoods of volatility states of intraday stock returns.

Keywords: Public information arrival; Asset volatility; News sentiment; Markov regime-switching FIEGARCH; Discrete choice model (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319309961

DOI: 10.1016/j.frl.2020.101446

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