Long-term volatility shapes the stock market’s sensitivity to news
We show that the S&P 500’s instantaneous response to surprises in U.S. macroeconomic announcements depends on the level of long-term stock market volatility. When long-term volatility is high, stock returns are more sensitive to news, and there is a pronounced asymmetry in the response to good a...
Gespeichert in:
| Hauptverfasser: | , , |
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| Dokumenttyp: | Buch/Monographie Arbeitspapier |
| Sprache: | Englisch |
| Veröffentlicht: |
Heidelberg
Universitätsbibliothek Heidelberg
05 Dez. 2023
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| Schriftenreihe: | AWI discussion paper series
no. 739 (November 2023) |
| In: |
AWI discussion paper series (no. 739 (November 2023))
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| DOI: | 10.11588/heidok.00034102 |
| Schlagworte: | |
| Online-Zugang: | Resolving-System, kostenfrei: https://nbn-resolving.de/urn:nbn:de:bsz:16-heidok-341022 Resolving-System, kostenfrei: https://doi.org/10.11588/heidok.00034102 Verlag, kostenfrei, Volltext: http://www.ub.uni-heidelberg.de/archiv/34102 Verlag, kostenfrei: https://archiv.ub.uni-heidelberg.de/volltextserver/34102/7/Conrad_Schoelkopf_Tushteva_dp739_2023.pdf Resolving-System, kostenfrei: https://nbn-resolving.org/urn:nbn:de:bsz:16-heidok-341022 Langzeitarchivierung Nationalbibliothek, kostenfrei: https://d-nb.info/1312277459/34 Resolving-System, kostenfrei: https://hdl.handle.net/10419/283465 
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| Verfasserangaben: | Christian Conrad, Julius Theodor Schoelkopf and Nikoleta Tushteva |
| Zusammenfassung: | We show that the S&P 500’s instantaneous response to surprises in U.S. macroeconomic announcements depends on the level of long-term stock market volatility. When long-term volatility is high, stock returns are more sensitive to news, and there is a pronounced asymmetry in the response to good and bad news. We explain this by combining the Campbell-Shiller log-linear present value framework with a two-component volatility model for the conditional variance of cash flow news and allowing for volatility feedback. In our model, innovations to the long-term volatility component are the most important driver of discount rate news. Large announcement surprises lead to upward revisions in future required returns, which dampens/amplifies the effect of good/bad news. |
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| Beschreibung: | Online Resource |
| DOI: | 10.11588/heidok.00034102 |