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Reaction to nonscheduled news during financial crisis: Australian evidence

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  • L. A. Smales

Abstract

News analytics software applies linguistic algorithms to newswire releases in order to assign a sentiment score; this allows users to comprehend the unstructured data flowing through newswires. I examine the market reaction of leading Australian stocks to stock-specific news flow during the financial crisis of 2007-2009. A high-frequency VAR model with GARCH effects modelled through a VECH(1,1) specification is utilized. I find a significant market impact induced by contemporaneous news items, a significant and positive relationship between volume and volatility, an increase in bid-ask spreads following periods of increased volatility, and evidence of volatility persistence.

Suggested Citation

  • L. A. Smales, 2014. "Reaction to nonscheduled news during financial crisis: Australian evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 21(17), pages 1214-1220, November.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:17:p:1214-1220
    DOI: 10.1080/13504851.2014.920465
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    Cited by:

    1. Akihiro Omura & Neda Todorova, 2019. "The quantile dependence of commodity futures markets on news sentiment," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(7), pages 818-837, July.
    2. Nepp, Alexander & Okhrin, Ostap & Egorova, Julia & Dzhuraeva, Zarnigor & Zykov, Alexander, 2022. "What threatens stock markets more - The coronavirus or the hype around it?," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 519-539.

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