Article ID: | iaor2006190 |
Country: | Netherlands |
Volume: | 163 |
Issue: | 1 |
Start Page Number: | 253 |
End Page Number: | 275 |
Publication Date: | May 2005 |
Journal: | European Journal of Operational Research |
Authors: | Blasco Natividad, Corredor Pilar, Rio Cristina Del, Santamara Rafael |
Keywords: | stock market |
This paper is a data-based attempt to analyse what kind of information basically affects close-to-open returns, open-to-close returns, volatility and volume in actively traded individual securities on the Spanish stock market. Specifically, we are interested in detecting how these variables react to specific pieces of news considered as exogeneous information. However, as volume itself could be interpreted as a proxy of the information flow, we first apply the linear and nonlinear Granger causality tests from volume to return and to volatility. We do not find evidence supporting this latter hypothesis. Furthermore, we only find significant evidence of linear causality from volume to volatility. The other major finding is that both bad news and the Dow Jones play a significant informational role in explaining price changes and volatility. As a consequence of these findings, we also test the residual role of volume as a proxy for noise/liquidity trading after filtering for news, although we do not find evidence in favour of this argument.