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Volume, Volatility, and Public News Announcements

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  • Tim Bollerslev
  • Jia Li
  • Yuan Xue

Abstract

We provide new empirical evidence for the way in which financial markets process information. Our results rely critically on high-frequency intraday price and volume data for the S&P 500 equity portfolio and U.S. Treasury bonds, along with new econometric techniques, for making inference on the relationship between trading intensity and spot volatility around public news announcements. Consistent with the predictions derived from a theoretical model in which investors agree to disagree, our estimates for the intraday volume-volatility elasticity around important news announcements are systematically below unity. Our elasticity estimates also decrease significantly with measures of disagreements in beliefs, economic uncertainty, and textual-based sentiment, further highlighting the key role played by differences-of-opinion.

Suggested Citation

  • Tim Bollerslev & Jia Li & Yuan Xue, 2018. "Volume, Volatility, and Public News Announcements," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2005-2041.
    • Handle: RePEc:oup:restud:v:85:y:2018:i:4:p:2005-2041.
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    File URL: http://hdl.handle.net/10.1093/restud/rdy003
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    More about this item

    Keywords

    Differences-of-opinion; High-frequency data; Jumps; Macroeconomic news announcements; Trading volume; Stochastic volatility; Economic uncertainty; Textual sentiment;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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