Stale information, shocks and volatility

Reint Gropp and Arjan Kadareja

No 07-012, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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

Keywords: Realized volatility; public information; transparency (search for similar items in EconPapers)
JEL-codes: G14 G21 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cfn, nep-mst and nep-rmg
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https://www.econstor.eu/bitstream/10419/24562/1/dp07012.pdf (application/pdf)

Related works:
Journal Article: Stale Information, Shocks, and Volatility (2012)
Journal Article: Stale Information, Shocks, and Volatility (2012)
Working Paper: Stale information, shocks and volatility (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:5499

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