Measuring and Testing the Impact of News on Volatility
AbstractThis paper introduces the News Impact Curve to measure how new information is incorporated into volatility estimates. A variety of new and existing ARCH models are compared and estimated with daily Japanese stock return data to determine the shape of the News Impact Curve. New diagnostic tests are presented which emphasize the asymmetry of the volatility response to news. A partially non-parametric ARCH model is introduced to allow the data to estimate this shape. A comparison of this model with the existing models suggests that the best models are one by Glosten Jaganathan and Runkle (GJR) and Nelson's EGARCE. Similar results hold on a pre-crash sample period but are less strong.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3681.
Date of creation: Apr 1991
Date of revision:
Publication status: published as Journal of Finance, 1993, vol. 48, issue 5, pages 1749-78
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Other versions of this item:
- Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-78, December.
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