Public and private information: Lessons from the emerging Tunisian stock market

Abstract

The aim of the present research is to investigate the roles of public and private information flows in explaining intraday returns and intraday return volatility for a securities sample from the Tunisian stock market. Using an econometric approach based on uni-variate ARCH-type models, our empirical results reveal that in major Tunisian stocks the instantaneous private information proxied by the contemporaneous order imbalance is the dominant factor in explaining intraday returns. In addition, our findings cleary indicate that the trading volume represents a dominant factor to explain the intraday return volatility for the entirety of stocks when there is a simultaneous arrival of public and private information whether in the case of the instantaneous flow or in the sequential flow. Furthermore, our results indicate that volatility persistence disappears when trading volume and order imbalance are included as explanatory variables in the conditional variance equation.

Keywords::

• information flow
• uni-variate ARCH models
• trading volume
• order imbalance
• return volatility
• stock return

JEL Classification::

• E44
• E62
• G21
• G32
• O16