Multifrequency news and stock returns
By: Laurent E. Calvet, Adlai J. Fisher.
Contributors: Fisher, Adlai.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11441; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11441.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Stocks -- Prices -- United States -- Econometric models.; Equilibrium (Economics) -- Mathematical models.
Description: "Recent research documents that aggregate stock prices are driven by shocks with persistence levels ranging from daily intervals to several decades.  Building on these insights, we introduce a parsimonious equilibrium model in which regime-shifts of heterogeneous durations affect the volatility of dividend news.  We estimate tightly parameterized specifications with up to 256 discrete states on daily U.S.  equity returns.  The multifrequency equilibrium has significantly higher likelihood than the classic Campbell and Hentschel (1992) specification, while generating volatility feedback effects 6 to 12 times larger.  We show in an extension that Bayesian learning about stochastic volatility is faster for bad states than good states, providing a novel source of endogenous skewness that complements the "uncertainty" channel considered in previous literature (e.g., Veronesi, 1999).  Furthermore, signal precision induces a tradeoff between skewness and kurtosis, and economies with intermediate investor information best match the data"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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Also available in print.
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Mode of access: World Wide Web.