The Arrival of Information and Price Adjustment Across Extreme Quantiles: Global Evidence

Abstract

This study investigates the impact of information arrival on prices for 21 major global market indices for the period 1998–2018, employing quantile regression methodology. The results show that there is a contemporaneous and causal effect of volume on returns. This return-volume relation is a manifestation of systematic market-wide information that is released in an autocorrelated manner to market participants. This information is absorbed by the market participants over short horizons, within a day. This leads to uniform expectations and, in turn, lower volatility levels. The effect of volume on return is heterogeneous across the conditional quantiles, reflecting the contrasting patterns in the transmission of positive and negative news. This evidence is more pronounced when the intensity of information arrival is high (the tails of return distribution), which is consistent with the mixture of distribution hypothesis and information asymmetry hypothesis.