Public Information Arrival and Volatility of Intraday Stock Returns

How does trading volume affect financial return distributions?

“…Consistent with Mougoué and Aggarwal (2011), we find that there is a bidirectional spillover effect in the volume-volatility measures within the same asset markets in all cases. Our finding of a positive volume-volatility relationship is also widely supported in previous empirical studies conducted within stock and FX markets (see Bauwens et al, 2005;Bjønnes et al, 2005;Melvin & Yin, 2000 for examples of FX markets and Chan & Fong, 2006;Chen, Firth, & Rui, 2001;Kalev et al, 2004, for examples of stock markets).…”

“…2 For the volume-volatility relation, the theories of MDH (e.g., Andersen, 1996;Clark, 1973;Epps & Epps, 1976;Tauchen & Pitts, 1983) and DOH (e.g., Harris & Raviv, 1993;Shalen, 1993) suggest a positive contemporaneous link; whereas, a lead-lag relationship between them is added by an implication of SAIH (e.g., Copeland, 1976Copeland, , 1977. Empirically, these theories have been widely tested and accepted in many studies conducted within stock or Foreign Exchange (FX) markets (e.g., Bauwens, Omrane, & Giot, 2005;Bjønnes, Rime, & Solheim, 2005;Chan & Fong, 2000;Chan & Fong, 2006;Gallant, Rossi, & Tauchen, 1992;Giot et al, 2010;Kalev, Liu, & Pham, 2004;Karpoff, 1987). While stock market reactions are well explained by information-based trading models (e.g., Andersen, 1996;Copeland, 1976;Epps & Epps, 1976), there is also much evidence to suggest that FX trading activities also convey information for currency market participants (see Evans & Lyons, 2002;Ito, Lyons, & Melvin, 1998;Naranjo & Nimalendran, 2000 among others).…”

Intraday return spillovers and its variations across trading sessions

“…Taking into account the volatility persistence in equity returns, we apply an MA(1)-GARCH(1,1) model which represents the return generating functions of the intraday stock returns. A similar ARCH-type process was also adopted in some of the earlier studies as a means of describing the dynamics of intraday returns, primarily to take into account the volatility persistence observed in the return series (Andersen andBollerslev 1997, 1998;Cyree and Winters 2001;Rahman et al 2002;Darrat et al 2003;and Kalev et al 2004).…”

Effects of Firm-Specific Public Announcements on Market Dynamics

“…By using S&P 500 index returns and the number of shares traded on New York Stock Exchange, they observe a positive relationship between public information and trading volume but an insignificant relationship to price volatility. In a similar attempt, Kalev et al (2004) present a positive and significant relationship between the arrival rate of news and the conditional variance of stock returns by using high-frequency data from the Australian Stock Exchange. Ranaldo (2008) provides a detailed analysis of the market behavior around the time firm-specific news is released.…”