Internet information arrival and volatility of SME PRICE INDEX

This article employs the number of news appeared in Baidu News as a novel proxy for information arrival and investigates the validation of the Mixture of Distribution Hypothesis (MDH) using a sample of SME PRICE INDEX in China. The empirical results reveal a positive impact of internet information on the conditional volatility of stock returns. Compared with the prevailing proxies (trading volume and its adjustments), the volatility persistence is most decreased when this novel proxy is incorporated into the conditional variance equation of the GARCH model. Some tentative explanations are also given to expound the non-disappeared GARCH effects.

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