Early News is Good News: The Effects of Market Opening on Market Volatility
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Giampiero M. Gallo
In this paper, we examine the characteristics of market opening news and its impact on the estimated coefficients of the conditional volatility models of the GARCH class. We find that the differences between the opening price of one day and the closing price of the day before have different characteristics when considering various stock-market indices on which options are actively traded. The impact of a suitable positive-valued transformation of these differences has the effects of modifying the direct impact of daily innovations on volatility and reducing the estimated overall persistence of such innovations. The overall contribution of the variable is evaluated in an out-of-sample forecasting exercise, where we obtain significant improvements above the simple GARCH model.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Article
- Testing the Expectations Theory of the Term Structure of Interest Rates Using Model-Selection Methods
- Forecasting Exchange Rates Using Neural Networks for Technical Trading Rules
- Early News is Good News: The Effects of Market Opening on Market Volatility
- GARCH for Irregularly Spaced Financial Data: The ACD-GARCH Model
- The Current Depth-of-Recession and Unemployment-Rate Forecasts
- Predictive Evaluation of Econometric Forecasting Models in Commodity Futures Markets
Artikel in diesem Heft
- Article
- Testing the Expectations Theory of the Term Structure of Interest Rates Using Model-Selection Methods
- Forecasting Exchange Rates Using Neural Networks for Technical Trading Rules
- Early News is Good News: The Effects of Market Opening on Market Volatility
- GARCH for Irregularly Spaced Financial Data: The ACD-GARCH Model
- The Current Depth-of-Recession and Unemployment-Rate Forecasts
- Predictive Evaluation of Econometric Forecasting Models in Commodity Futures Markets
