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|Title:||The impact of macroeconomic news on quote adjustments, noise, and informational volatility |
Hess, Dieter E.
|Issue Date:||2011 |
|Series/Report no.:||CFR working paper 11-06|
|Abstract:||We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. Bid and ask returns are decomposed into a common ('efficient return') factor and two market-side-specific components capturing market microstructure effects. The corresponding variance components reflect information-driven and noise-induced volatilities.We find that all volatility components reveal distinct dynamics and are positively influenced by news. The proportion of noise-induced variances is highest before announcements and significantly declines thereafter. Moreover, news-affected responses in all volatility components are influenced by order flow imbalances.|
|Document Type:||Working Paper|
|Appears in Collections:||CFR Working Papers, Centre for Financial Research (CFR), Universität Köln|
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