Market Distraction and Near-Zero Volatility Persistence

Abstract

This study shows that during the FIFA World Cups, the Olympic Games, and Christmas and New Year, the average daily volatility persistence is near zero across 17 equity indices in 14 developed economies. During the World Cups, the volatility persistence decreases with proxies for the intensity of distraction and negative sentiment. The evidence indicates reduced information production by distracted financial analysts and journalists. In addition, volatility persistence is low in June and high in January and October, consistent with reduced attention during holidays and heightened attention afterwards. The seasonal variations in volatility persistence explain 8.7% of variations in volatility level across global markets.