The Impact of Macroeconomic News on QuoteAdjustments, Noise, and InformationalVolatility

We study the impact of the arrival of macroeconomic news on the informational andnoise-driven components in high-frequency quote processes and their conditional variances.Bid and ask returns are decomposed into a common ("ecient return") factorand two market-side-specic components capturing market microstructure eects.The corresponding variance components reect information-driven and noise-inducedvolatilities.We nd that all volatility components reveal distinct dynamics and are positivelyinuenced by news. The proportion of noise-induced variances is highest beforeannouncements and signicantly declines thereafter. Moreover, news-aected responsesin all volatility components are inuenced by order ow imbalances.