The impact of macroeconomic news on quote adjustments, noise, and informational volatility

Nikolaus Hautsch, Dieter Hess and David Veredas

Journal of Banking & Finance, 2011, vol. 35, issue 10, 2733-2746

Abstract: We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. We decompose bid and ask returns into a common ("efficient return") factor and two market-side-specific components capturing market microstructure effects. The corresponding variance components reflect information-driven and noise-induced volatilities. We find that all volatility components reveal distinct dynamics and are positively influenced by news. The proportion of noise-induced variances is highest before announcements and significantly declines thereafter. Moreover, news-affected responses in all volatility components are influenced by order flow imbalances.

Keywords: Efficient; return; Macroeconomic; announcements; Microstructure; noise; Informational; volatility (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (26)

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Related works:
Working Paper: The impact of macroeconomic news on quote adjustments, noise and informational volatility (2011)
Working Paper: The impact of macroeconomic news on quote adjustments, noise, and informational volatility (2011)
Working Paper: The impact of macroeconomic news on quote adjustments, noise and informational volatility (2010)
Working Paper: The impact of macroeconomic news on quote adjustments, noise, and informational volatility (2010)
Working Paper: The impact of macroeconomic news on quote adjustments, noise, and informational volatility (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:10:p:2733-2746

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