No News Is Not Good News: Evidence from the Intraday Return Volatility - Volume Relationship in Shanghai Stock Exchange

Abstract

Through this research, we find that the asymmetric volatility phenomenon is reversed in the Shanghai Stock Exchange during bull markets. That is, volatility increases more with good news than with bad news. This evidence is inconsistent with the US markets. Further examination of this phenomenon reveals that the positive impact of good news on volatility is driven by return chasing behaviour of investors during bull markets. We also find that volatility increases after stock price declines in bear markets. After controlling for liquidity shifts, we observe similar patterns in volatility in both bull and bear markets. We posit that institutional and behavioural factors are the major driving forces of observed volatility patterns in Chinese stock market.

Keywords: MDH, trading volume, return volatility, asymmetric effect, EGARCH-GED, Chinese stock market

JEL Classification: G12, G14, G15