The Handbook of News Analytics in Finance

12.A TECHNICAL APPENDIX

We first test the relation between news arrivals and volatility of S&P/ASX 200 Index returns and SPI 200 Futures returns by estimating the following censored regression model:

in which |r_t| is either the absolute value of the seasonally adjusted return of the S&P/ ASX 200 Index or the SPI 200 Futures at the tth interval, N_t is the number of all company announcements, and V_t-1 is the lagged de-trended trading volume. The lagged de-trended trading volume is also included to account for the potential that this variable does reflect to some degree the intensity of private information flows not accounted for by N_t. The results are obtained based on maximum likelihood estimation with the left-censoring point of 0 imposed on the dependent variable.

Table 12.6. Company news announcements and intraday conditional volatility of the S&P/ASX 200 Index and the SPI 200 Futures (multivariate GARCH results). The results are based on estimation of the following multivariate GARCH(1,1) model:

in which r_1t and r_2t are the seasonally adjusted returns of the S&P/ASX 200 Index and the SPI 200 Futures at the rth interval, and are conditional variances of the error processes