The impact of macroeconomic news on quote adjustments, noise, and informational volatility |
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Authors: | Nikolaus Hautsch Dieter Hess |
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Affiliation: | a School of Business and Economics, Humboldt-Universität zu Berlin, Berlin, Germany b The Faculty of Management, Economics and Social Sciences, University of Cologne, Cologne, Germany c ECARES, Solvay Brussels School of Economics and Management, Université libre de Bruxelles, Brussels, Belgium |
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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. |
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Keywords: | C32 G14 E44 |
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