Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/44967
Authors: 
Hautsch, Nikolaus
Hess, Dieter E.
Veredas, David
Year of Publication: 
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.
Subjects: 
effcient return
macroeconomic announcements
microstructure noise
informational volatility
JEL: 
C32
G14
E44
Document Type: 
Working Paper

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