Autori
Gallo, Giampiero M.
Pacini, Barbara

Titolo
Early news is good news: The effects of market opening on market volatility
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1998 - Fascicolo: 3 - Pagina iniziale: 1 - Pagina finale: 27

In this paper we examine thè characteristics of market opening news and its impact on the estimated cocfficierits of thè couditional volatility modcls of thè GARCH class. We find that the differences between the opening price of one day and thè closing price of thè day before have different characteristics when considering various stock market indices on which options are actively traded. The impact of a suitable positive-valncd transforrnation of these differeiices has thè effect of modifying the. dircct impact of daily innovations on volatility, and of reducing the estimated overall persistence of such innovations. The overall contribution of thè variablc is cvaluated in ari out-of-samplc forecasting exercise where we obtain significant improvements above the simple GARCH model.




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