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

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. Bid and ask returns are decomposed into a commo
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. Bid and ask returns are decomposed 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. JEL Classification: C32, G14, E44 Keywords: Efficient Return, Macroeconomic Announcements, Microstructure Noise, Informational Volatility.
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Metadaten
Author:Nikolaus Hautsch, Dieter Hess, David Veredas
URN:urn:nbn:de:hebis:30-75128
Series (Serial Number):CFS working paper series (2010, 01)
Document Type:Working Paper
Language:English
Date of Publication (online):2010/02/25
Year of first Publication:2010
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2010/02/25
Tag:Efficient Return ; Informational Volatility; Macroeconomic Announcements ; Microstructure Noise
HeBIS PPN:221553525
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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