Stale information, shocks and volatility
- We propose a new approach to measuring the effect of unobservable private information or beliefs on volatility. Using high-frequency intraday data, we estimate the volatility effect of a well identified shock on the volatility of the stock returns of large European banks as a function of the quality of available public information about the banks. We hypothesise that, as the publicly available information becomes stale, volatility effects and its persistence should increase, as the private information (beliefs) of investors becomes more important. We find strong support for this idea in the data. We argue that the results have implications for debate surrounding the opacity of banks and the transparency requirements that may be imposed on banks under Pillar III of the New Basel Accord.
| Author: | Reint GroppGND, Arjan Kadareja |
|---|---|
| URN: | urn:nbn:de:hebis:30-43651 |
| Parent Title (English): | Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 173 |
| Series (Serial Number): | Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (173) |
| Publisher: | Univ., Fachbereich Wirtschaftswiss. |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2007 |
| Year of first Publication: | 2007 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2007/04/23 |
| Tag: | public information; realised volatility; transparency |
| GND Keyword: | Aktienmarkt; Volatilität |
| Issue: | Version Februar 2007 |
| Page Number: | 42 |
| HeBIS-PPN: | 210145188 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
