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Macroeconomic news, announcements, and stock market jump intensity dynamics

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  • Rangel, José Gonzalo

Abstract

This paper examines the effect of macroeconomic releases on stock market volatility through a Poisson-Gaussian-GARCH process with time-varying jump intensity, which is allowed to respond to such information. The day of the announcement, per se, is found to have little impact on jump intensities. Employment releases are an exception. However, when macroeconomic surprises are considered, inflation shocks show persistent effects while monetary policy and employment shocks reveal only short-lived effects. Also, the jump intensity responds asymmetrically to macroeconomic shocks. Evidence on macroeconomic variables relevance in explaining jump dynamics and improving volatility forecasts on event days is provided.

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Bibliographic Info

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

Volume (Year): 35 (2011)
Issue (Month): 5 (May)
Pages: 1263-1276

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:5:p:1263-1276

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Keywords: Conditional jump intensity Conditional volatility Macroeconomic announcements;

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Citations

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Cited by:
  1. Massimiliano Caporin & Eduardo Rossi & Paolo Santucci de Magistris, 2011. "Conditional jumps in volatility and their economic determinants," "Marco Fanno" Working Papers 0138, Dipartimento di Scienze Economiche "Marco Fanno".
  2. Brée, David S. & Joseph, Nathan Lael, 2013. "Testing for financial crashes using the Log Periodic Power Law model," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 287-297.
  3. León, Ángel & Sebestyén, Szabolcs, 2012. "New measures of monetary policy surprises and jumps in interest rates," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2323-2343.
  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. Löffler, Gunter & Posch, Peter N, 2013. "Wall Street’s bailout bet: Market reactions to house price releases in the presence of bailout expectations," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5147-5158.
  6. Fiordelisi, Franco & Galloppo, Giuseppe & Ricci, Ornella, 2014. "The effect of monetary policy interventions on interbank markets, equity indices and G-SIFIs during financial crisis," Journal of Financial Stability, Elsevier, vol. 11(C), pages 49-61.
  7. Gustavo Abarca & José Gonzalo Rangel & Guillermo Benavides, 2010. "Exchange Rate Market Expectations and Central Bank Policy: The case of the Mexican Peso-US Dollar from 2005-2009," Working Papers 2010-17, Banco de México.
  8. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "How do OPEC news and structural breaks impact returns and volatility in crude oil markets? Further evidence from a long memory process," Energy Economics, Elsevier, vol. 42(C), pages 343-354.
  9. Mun, Kyung-Chun, 2012. "The joint response of stock and foreign exchange markets to macroeconomic surprises: Using US and Japanese data," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 383-394.
  10. Charles, Amélie & Darné, Olivier, 2014. "Large shocks in the volatility of the Dow Jones Industrial Average index: 1928–2013," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 188-199.

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