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(1993)
Measuring and Testing the Impact of News on Volatility
- Publisher
- Wiley
- Copyright
- Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia 2001
- ISSN
- 0004-900X
- eISSN
- 1467-8454
- DOI
- 10.1111/1467-8454.00142
- Publisher site
- See Article on Publisher Site
Abstract
In this paper we evaluate the impact that stock returns recorded between market closing and opening the next business day have on intra‐daily volatility. A simple test shows that the estimated volatility clustering of the intra‐daily returns may be affected by a market opening surprise bias. An extension of the standard GARCH model is suggested here to include the effect of this surprise and is applied on a sample of largely traded US stocks. The performance of two specifications in which this effect is included is evaluated in an out‐of‐sample forecasting exercise relative to their standard counterparts.
Journal
Australian Economic Papers – Wiley
Published: Dec 1, 2001