French, Kenneth R. and Roll, Richard (1986) Stock return variances: The arrival of information and the reaction of traders. Journal of Financial Economics, 17 (1). pp. 5-26. ISSN 0304-405X. doi:10.1016/0304-405X(86)90004-8. https://resolver.caltech.edu/CaltechAUTHORS:20190430-084744475
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Abstract
Asset prices are much more volatile during exchange trading hours than during non-trading hours. This paper considers three explanations for this phenomenon: (1) volatility is caused by public information which is more likely to arrive during normal business hours; (2) volatility is caused by private information which affects prices when informed investors trade; and (3) volatility is caused by pricing errors that occur during trading. Although a significant fraction of the daily variance is caused by mispricing, the behavior of returns around exchange holidays suggests that private information is the principle factor behind high trading-time variances.
| Item Type: | Article | ||||||
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| Additional Information: | © 1986 Published by Elsevier B.V. This paper has benefited from the comments of seminar participants at Boston College, the University of British Columbia, the University of Chicago, Dartmouth College, Harvard University, Northwestern University, Purdue University and Stanford University. We are also grateful to Craig Ansley, Merton Miller, Steven Ross, Robert Stambaugh, William Schwert, Jerold Warner (the referee), and especially, Douglas Diamond and Eugene Fama for comments on an earlier draft. | ||||||
| Issue or Number: | 1 | ||||||
| DOI: | 10.1016/0304-405X(86)90004-8 | ||||||
| Record Number: | CaltechAUTHORS:20190430-084744475 | ||||||
| Persistent URL: | https://resolver.caltech.edu/CaltechAUTHORS:20190430-084744475 | ||||||
| Official Citation: | Kenneth R. French, Richard Roll, Stock return variances: The arrival of information and the reaction of traders, Journal of Financial Economics, Volume 17, Issue 1, 1986, Pages 5-26, ISSN 0304-405X, https://doi.org/10.1016/0304-405X(86)90004-8. (http://www.sciencedirect.com/science/article/pii/0304405X86900048) | ||||||
| Usage Policy: | No commercial reproduction, distribution, display or performance rights in this work are provided. | ||||||
| ID Code: | 95112 | ||||||
| Collection: | CaltechAUTHORS | ||||||
| Deposited By: | Tony Diaz | ||||||
| Deposited On: | 30 Apr 2019 19:55 | ||||||
| Last Modified: | 16 Nov 2021 17:10 |
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