TY - JOUR
T1 - Evolution of transitory volatility over the week
AU - Cao, Charles
AU - Choe, Hyuk
N1 - Funding Information:
We are grateful to Jim Angel, Tim Bollerslev, Frank Hatheway, Avner Kalay, Donald Keim, Bill Kracaw, Ananth Madhavan, Harold Mulherin, Cathy Niden, Dennis Sheehan and seminar participants at Georgetown University, Penn. State University, University of Notre Dame, and University of Utah for helpful comments.
Publisher Copyright:
© 2000 by Peking University Press All rights of reproduction in any form reserved.
PY - 2000/5
Y1 - 2000/5
N2 - This study examines the evolution of transitory volatility over the week for NYSE/AMEX stocks. We treat the block of five trading days during a week as a single trading session and control for disproportionate rates of information arrival over the week by comparing variances of weekly returns measured on different days of the week. Our evidence, from both portfolios and individual stocks, is largely consistent with the implications of price formation models. We find that prices on Mondays contain significantly greater transitory volatility than prices on the other days of the week. Transitory volatility declines steadily over the week. Cross-sectionally, the speed and magnitude of dissipation of transitory volatility are greater for larger firms. Portfolio returns exhibit a much stronger pattern, suggesting that much of transitory volatility varying in the process of price formation is not diversifiable. Similar evidence is obtained from our analyses of the Dow Jones Index, the S&P 500 index futures and the Japanese Nikkei 225 Index.
AB - This study examines the evolution of transitory volatility over the week for NYSE/AMEX stocks. We treat the block of five trading days during a week as a single trading session and control for disproportionate rates of information arrival over the week by comparing variances of weekly returns measured on different days of the week. Our evidence, from both portfolios and individual stocks, is largely consistent with the implications of price formation models. We find that prices on Mondays contain significantly greater transitory volatility than prices on the other days of the week. Transitory volatility declines steadily over the week. Cross-sectionally, the speed and magnitude of dissipation of transitory volatility are greater for larger firms. Portfolio returns exhibit a much stronger pattern, suggesting that much of transitory volatility varying in the process of price formation is not diversifiable. Similar evidence is obtained from our analyses of the Dow Jones Index, the S&P 500 index futures and the Japanese Nikkei 225 Index.
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M3 - Article
AN - SCOPUS:85043789492
VL - 1
SP - 49
EP - 77
JO - Annals of Economics and Finance
JF - Annals of Economics and Finance
SN - 1529-7373
IS - 1
ER -