TY  - JOUR
AU  - Calvet,Laurent E.
AU  - Fisher,Adlai J.
TI  - Multifrequency News and Stock Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11441
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/w11441
L1  - http://www.nber.org/papers/w11441.pdf
N1  - Author contact info:
Laurent E. Calvet
Department of Finance
HEC Paris
1 rue de la Libération
78351 Jouy en Josas
France
Tel: +33 13 967 9409
Fax: +33 13 967 7085
E-Mail: calvet@hec.fr

Adlai Fisher
Sauder School of Business
University of British Columbia
2053 Main Mall, Vancouver BC, CANADA
V6T 1Z2
Tel: 604 822 8331
Fax: 604 822 4695
E-Mail: adlai.fisher@sauder.ubc.ca
AB  - 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.
ER  -