Firm-specific news arrival and the volatility of intraday stock index and futures returns

This chapter investigates the impact of the rate of information arrival on return volatility. Prior research (Kalev et al., 2004) has shown that both the quantity and quality of news are superior proxies for information flow. In the current chapter we utilize high-frequency data based on the S P/ASX 200 Index as well as futures contracts on the S P/ASX 200 Index over the period from October 2003 to September 2009. Volatility persistence appears to be significantly reduced by inclusion of the number of specific news items into the variance equations of the spot and futures index. Overall, our findings are consistent with the mixture of distribution hypothesis (MDH).