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Volatility spillovers and the effect of news announcements

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Jiang, G. J., Konstantinidi, E. and Skiadopoulos, George (2012) Volatility spillovers and the effect of news announcements. Journal of Banking & Finance, Vol.36 (No.8). pp. 2260-2273. doi:10.1016/j.jbankfin.2012.04.006

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Official URL: http://www.elsevier.com/locate/jbf

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Abstract

We examine the effect of US and European news announcements on the spillover of volatility across US and European stock markets. Using synchronously observed international implied volatility indices at a daily frequency, we find significant spillovers of implied volatility between US and European markets as well as within European markets. We observe a stark contrast in the effect of scheduled versus unscheduled news releases. Scheduled (unscheduled) news releases resolve (create) information uncertainty, leading to a decrease (increase) in implied volatility. Nevertheless, news announcements do not fully explain the volatility spillovers, although they do affect the magnitude of volatility spillovers. Our results are robust to extreme market events such as the recent financial crisis and provide evidence of volatility contagion across markets.

Item Type: Journal Article
Divisions: Faculty of Social Sciences > Warwick Business School
Journal or Publication Title: Journal of Banking & Finance
Publisher: Elsevier Science BV
ISSN: 0378-4266
Official Date: August 2012
Dates:
DateEvent
August 2012Published
Volume: Vol.36
Number: No.8
Page Range: pp. 2260-2273
DOI: 10.1016/j.jbankfin.2012.04.006
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access

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