Review of Financial Studies Vol. 24 No. 1 2011
News—Good or Bad—and Its Impact on Volatility Predictions over Multiple Horizons
Abstract
[We introduce a new class of parametric models applicable to a mixture of high and low frequency returns and revisit the concept of news impact curves introduced by Engle and Ng (1993). Overall, we find that moderately good (intra-daily) news reduces volatility (the next day), while both very good news (unusual high intra-daily positive returns) and bad news (negative returns) increase volatility, with the latter having a more severe impact. The asymmetries disappear over longer horizons. Models featuring asymmetries dominate in terms of out-of-sample forecasting performance, especially during the 2007-2008 financial crisis.]
- Volume
- 24
- Issue
- 1
- Pages
- 46-81
- Sources
- bibtex:phds-export.bib