News Sentiment and High-Frequency Volatility Dynamics in the Japanese Stock Exchange
Faculty of Business and Law
School of Business
This chapter investigates the impact of high-frequency public news sentiment on intraday return volatility of the constituent stocks in the Tokyo Stock Exchange over the period from January 2000 to December 2012. By using textual and linguistic analytical techniques, we compute the various sentiment scores for all the intraday firm-specific news releases obtained from Dow Jones Newswires. The results show that intraday volatility persistence is significantly reduced after incorporating the effects of firm-specific news releases and their sentiment scores. Compared with positive news, the impact of news releases with negative sentiment on future intraday volatility levels is higher. These findings highlight the importance of public news sentiment on examining high-frequency volatility dynamics.