Measuring and Testing the Impact of News on Volatility

Robert Engle and Victor K. Ng

No 3681, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper introduces the News Impact Curve to measure how new information is incorporated into volatility estimates. A variety of new and existing ARCH models are compared and estimated with daily Japanese stock return data to determine the shape of the News Impact Curve. New diagnostic tests are presented which emphasize the asymmetry of the volatility response to news. A partially non-parametric ARCH model is introduced to allow the data to estimate this shape. A comparison of this model with the existing models suggests that the best models are one by Glosten Jaganathan and Runkle (GJR) and Nelson's EGARCE. Similar results hold on a pre-crash sample period but are less strong.

Date: 1991-04
Note: ME
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Citations: View citations in EconPapers (18)

Published as Journal of Finance, 1993, vol. 48, issue 5, pages 1749-78

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Journal Article: Measuring and Testing the Impact of News on Volatility (1993)
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