Review of Financial Studies Vol. 32 No. 3 2019

Information, Trading, and Volatility: Evidence from Firm-Specific News

Jacob Boudoukh¹; Ronen Feldman²; Shimon Kogan³; Matthew Richardson⁴

¹ Arison School of Business, IDC Herzliya , · ² School of Business Administration, The Hebrew University · ³ Arison School of Business, IDC Herzliya and Sloan School of Management, MIT · ⁴ Stern School of Business, New York University, and NBER

Abstract

What moves stock prices? Prior literature concludes that the revelation of private information through trading, and not public news, is the primary driver. We revisit the question by using textual analysis to identify fundamental information in news. We find that this information accounts for 49.6% of overnight idiosyncratic volatility (vs. 12.4% during trading hours), with a considerable fraction due to days with multiple news types. We use our measure of public information arrival to reinvestigate two important contributions in the literature related to individual R^2s of stock returns on aggregate factors.Received February 24, 2016; editorial decision May 19, 2018 by Editor Andrew Karolyi.

DOI

10.1093/rfs/hhy083

Volume

32

Issue

3

Pages

992-1033

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

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