Stale Information, Shocks, and Volatility

Reint Gropp and Arjan Kadareja

Journal of Money, Credit and Banking, 2012, vol. 44, issue 6, 1117-1149

Abstract: We propose a new approach to measuring the effect of unobservable private information on volatility. Using intraday data, we estimate the effect of a well‐identified shock on the volatility of stock returns of European banks as a function of the quality of public information available about the banks. We hypothesize that as publicly available information becomes stale, volatility effects and its persistence increase, as private information of investors becomes more important. We find strong support for this idea in the data. We further show that stock volatility is higher just before important announcements if information is stale.

Date: 2012
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https://doi.org/10.1111/j.1538-4616.2012.00525.x

Related works:
Journal Article: Stale Information, Shocks, and Volatility (2012)
Working Paper: Stale information, shocks and volatility (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:44:y:2012:i:6:p:1117-1149

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