Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24562
Year of Publication: 
2007
Series/Report no.: 
ZEW Discussion Papers No. 07-012
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
We propose a new approach to measuring the effect of unobservable private information or beliefs on volatility. Using high-frequency intraday data, we estimate the volatility effect of a well identified shock on the volatility of the stock returns of large European banks as a function of the quality of available public information about the banks. We hypothesise that, as the publicly available information becomes stale, volatility effects and its persistance should increase, as the private information (beliefs) of investors become more important. We find strong support for this idea in the data. We argue that the results have implications for debate surrounding the opacity of banks and the transparency requirements that may be imposed on banks under Pillar III of the New Basel Accord
Subjects: 
Realized volatility
public information
transparency
JEL: 
G14
G21
Document Type: 
Working Paper

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