Volume, Volatility, and Public News Announcements
Jia Li and
Review of Economic Studies, 2018, vol. 85, issue 4, 2005-2041
We provide new empirical evidence for the way in which financial markets process information. Our results rely critically on high-frequency intraday price and volume data for the S&P 500 equity portfolio and U.S. Treasury bonds, along with new econometric techniques, for making inference on the relationship between trading intensity and spot volatility around public news announcements. Consistent with the predictions derived from a theoretical model in which investors agree to disagree, our estimates for the intraday volume-volatility elasticity around important news announcements are systematically below unity. Our elasticity estimates also decrease significantly with measures of disagreements in beliefs, economic uncertainty, and textual-based sentiment, further highlighting the key role played by differences-of-opinion.
Keywords: Differences-of-opinion; High-frequency data; Jumps; Macroeconomic news announcements; Trading volume; Stochastic volatility; Economic uncertainty; Textual sentiment (search for similar items in EconPapers)
JEL-codes: C51 C52 G12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:85:y:2018:i:4:p:2005-2041.
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