On the Effects of Private Information on Volatility
AbstractWe study the impact of private information on volatility. We develop a comprehensive framework to investigate this link while controlling for the effects of both public information (such as macroeconomic news releases) and private information on prices and the effect of public information on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find that private information, measured by order flow, is statistically and economically significant for explaining volatility. Private information is more important than public information, with the effect of an order flow shock on volatility being 18% larger than the effect of the most influential macroeconomic announcement.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2012-08.
Date of creation: 02 2012
Date of revision:
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Web page: http://www.econ.au.dk/afn/
Information; order flow; macroeconomic announcements; Treasury futures.;
Other versions of this item:
- Anne Opschoor & Michel van der Wel & Dick van Dijk & Nick Taylor, 2011. "On the Effects of Private Information on Volatility," Tinbergen Institute Discussion Papers 11-077/4, Tinbergen Institute.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-14 (All new papers)
- NEP-CTA-2012-03-14 (Contract Theory & Applications)
- NEP-ICT-2012-03-14 (Information & Communication Technologies)
- NEP-MST-2012-03-14 (Market Microstructure)
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