Asymmetric News Effects on Volatility: Good vs. Bad News in Good vs. Bad Times

Laakkonen, Helinä and Lanne, Markku (2008): Asymmetric News Effects on Volatility: Good vs. Bad News in Good vs. Bad Times.

Abstract

We study the impact of positive and negative macroeconomic US and European news announcements in different phases of the business cycle on the highfrequency volatility of the EUR/USD exchange rate. The results suggest that in general bad news increases volatility more than good news. The news effects also depend on the state of the economy: bad news increases volatility more in good times than in bad times, while there is no difference between the volatility effects of good news in bad and good times.

• Item Type: MPRA Paper
• Language: English
• Keywords: Volatility; News; Nonlinearity; Smooth Transition Models
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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