G. Mujtaba Mian

Volatility dynamics in high frequency financial data: an empirical investigation of the Australian equity returns

The behaviour of volatility for intraday high frequency returns of the ASX equity index is examined. It is found that volatility of the Australian equities follows an L-shaped curve over the trading day that is distinct from the U-shaped pattern commonly documented by previous studies on other markets. While GARCH model remains useful in capturing volatility clustering for high frequency returns, the intraday deterministic volatility seasonals need to be carefully accounted for before carrying out an analysis of the volatility dynamics. Moreover, the frequently documented asymmetric effect of positive and negative shocks to volatility disappears for returns recorded at higher frequencies.

Investor Sentiment and Stock Market Response to Corporate News

We examine whether market-wide investor sentiment influences the stock price response to firm-specific news. We use the recently developed measure of investor sentiment by Baker and Wurgler (2006, 2007) and focus on the stock price response to earnings announcements. Our results indicate that the prevailing sentiment sways stock price response to news in the direction of the sentiment - the positive stock price response to good news increases with sentiment, whereas the negative stock price response to bad news decreases with sentiment. The influence of sentiment on the stock price response is especially pronounced for small stocks, young stocks, volatile stocks, non-dividend paying stocks and distressed stocks. We find that sentiment also impacts the stock price response to dividend changes and stock split announcements.

Does More Market-Wide Information Originate While an Exchange is Open: Some Anomalous Evidence from the ASX

The common belief based on accumulated evidence from the US and Japan is that most price-relevant information originates while financial markets are in operation. In this paper, we present evidence from the Australian Stock Exchange (ASX) that contradicts this view. We find that a larger proportion of the information affecting the Australian equities in fact arrives during the overnight closing period of the ASX. We develop and implement tests to understand this puzzle. The results indicate that the primary source of this anomalous finding is the dominant influence of the information originating in the US, where businesses and exchanges open and close during the overnight period of the ASX.