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Simultaneous monetary policy announcements and international stock markets response: An intraday analysis

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  • Hussain, Syed Mujahid
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    Abstract

    This paper investigates the return and volatility response of major European and US equity indices to monetary policy surprises by utilizing extensive intraday data on 5-min price quotes along with a comprehensive dataset on monetary policy decisions and macroeconomic news announcements. The results indicate that the monetary policy decisions generally exert immediate and significant influence on stock index returns and volatilities in both European and the US markets. The findings also show that press conferences held by the European Central Bank (ECB) that follow monetary policy decisions on the same day have a clear impact on European index return volatilities. This implies that they convey additional important information to market participants. Overall, our analysis suggests that the use of high frequency data is critical to separate the effect of monetary policy actions from those of macroeconomic news announcements on stock index returns and volatilities.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 3 (March)
    Pages: 752-764

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:3:p:752-764

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Conditional mean Conditional volatility Macroeconomic news Monetary policy High frequency data;

    References

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    Cited by:
    1. Evans, Kevin P., 2011. "Intraday jumps and US macroeconomic news announcements," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2511-2527, October.
    2. Hautsch, Nikolaus & Hess, Dieter E. & Veredas, David, 2011. "The impact of macroeconomic news on quote adjustments, noise, and informational volatility," CFR Working Papers 11-06, University of Cologne, Centre for Financial Research (CFR).
    3. Tang, Yong & Luo, Yong & Xiong, Jie & Zhao, Fei & Zhang, Yi-Cheng, 2013. "Impact of monetary policy changes on the Chinese monetary and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4435-4449.
    4. Bekhet, Hussain Ali & Matar, Ali, 2013. "Co-integration and causality analysis between stock market prices and their determinates in Jordan," Economic Modelling, Elsevier, vol. 35(C), pages 508-514.
    5. Ozdagli, Ali K., 2013. "Not so fast: high-frequency financial data for macroeconomic event studies," Working Papers 13-19, Federal Reserve Bank of Boston.
    6. A.H. Ahmad & Nusrate Aziz & Shahina Rummun, 2013. "Interest Rate Pass-Through in the UK: Has the Transmission Mechanism Changed During the Financial Crisis?," Economic Issues Journal Articles, Economic Issues, vol. 18(1), pages 17-38, March.

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