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Is bad news cause of asymmetric volatility response? A note

Author

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  • N. Blasco
  • P. Corredor
  • R. Santamaria

Abstract

This article uses a direct test of the impact of economic news on stock volatility. The main interest is to test whether the asymmetric response of volatility can be due to the effect of bad news. To do this, this study takes items of news into account as exogenous variables. The analysis is divided into two stages, each of which uses different items of news as exogenous variables additional to the information provided by the residuals. The first stage uses more exhaustively classified information whereas the second considers daily information as a global sign. This study finds that bad news is responsible for most of the observed asymmetric behaviour of variance. Further, this study detects that the GJR model adequately captures the impact of bad news when traders are not ready to carry out a time-consuming analysis of the information.

Suggested Citation

  • N. Blasco & P. Corredor & R. Santamaria, 2002. "Is bad news cause of asymmetric volatility response? A note," Applied Economics, Taylor & Francis Journals, vol. 34(10), pages 1227-1231.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:10:p:1227-1231
    DOI: 10.1080/00036840110095436
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    Citations

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    Cited by:

    1. Lucy Amigo Dobaño & Francisco Rodríguez de Prado, 2003. "Alteraciones en el comportamiento bursátil de las acciones de empresas tecnológicas inducidas por el vencimiento de derivados," Working Papers 0308, Universidade de Vigo, Departamento de Economía Aplicada.
    2. Miralles-Quirós, José Luis & Daza-Izquierdo, Julio, 2015. "Do DOW returns really influence the intraday Spanish stock market behavior?," Research in International Business and Finance, Elsevier, vol. 33(C), pages 99-126.
    3. Olcay Yucel Culha & Fatih Ozatay & Gulbin Sahinbeyoglu, 2006. "The Determinants of Sovereign Spreads in Emerging Markets," Working Papers 0604, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    4. Yung-Shi Liau & Jack Yang, 2008. "The mean/volatility asymmetry in Asian stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(5), pages 411-419.
    5. Blasco, Natividad & Corredor, Pilar & Del Rio, Cristina & Santamaria, Rafael, 2005. "Bad news and Dow Jones make the Spanish stocks go round," European Journal of Operational Research, Elsevier, vol. 163(1), pages 253-275, May.
    6. Shekar Bose & Hafizur Rahman, 2022. "Are News Effects Necessarily Asymmetric? Evidence from Bangladesh Stock Market," SAGE Open, , vol. 12(4), pages 21582440221, October.
    7. Natividad Blasco & Pilar Corredor & Rafael Santamaría, 2010. "Does informed trading occur in the options market? Some revealing clues," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(3), pages 555-579, September.
    8. Kangogo, Moses & Volkov, Vladimir, 2022. "Detecting signed spillovers in global financial markets: A Markov-switching approach," International Review of Financial Analysis, Elsevier, vol. 82(C).
    9. Jose Luis Miralles-Marcelo & Jose Luis Miralles-Quiros & Maria del Mar Miralles-Quiros, 2010. "Intraday linkages between the Spanish and the US stock markets: evidence of an overreaction effect," Applied Economics, Taylor & Francis Journals, vol. 42(2), pages 223-235.
    10. Olcay Yucel Emir & Fatih Ozatay & Gulbin Sahinbeyoğlu, 2007. "Effects of US interest rates and news on the daily interest rates of a highly indebted emerging economy: evidence from Turkey," Applied Economics, Taylor & Francis Journals, vol. 39(3), pages 329-342.
    11. Mauro Bernardi & Leopoldo Catania & Lea Petrella, 2014. "Are news important to predict large losses?," Papers 1410.6898, arXiv.org, revised Oct 2014.

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