The impact of macroeconomic news on quote adjustments, noise and informational volatility
Hautsch, Nikolaus Hess, Dieter Veredas, David
Hautsch, Nikolaus
Hess, Dieter
Veredas, David
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2011
Journal
Journal of Banking and Finance
Book
Publication Volume
35
Publication Issue
10
Publication Begin page
2733
Publication End page
2746
Publication Number of pages
Collections
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
Accounting & Finance