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The impact of foreign macroeconomic news on financial markets in the Czech Republic, Hungary, and Poland

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Author Info

  • David Büttner
  • Bernd Hayo
  • Matthias Neuenkirch

    ()

Abstract

In this paper, we investigate the effects of euro area and US macroeconomic news on financial markets in the Czech Republic, Hungary, and Poland (CEEC-3) from 1999 to 2006. Using a GARCH model, we examine the impact of news on daily returns of three-month interest rates, stock market indices, exchange rates versus the euro, and the US dollar. First, both US and European macroeconomic news has a significant impact on CEEC-3 financial markets. Second, the process of European integration is accompanied by an increasing importance of euro area news relative to US news. Third, there are country-specific differences: for example, the Czech stock market is relatively more affected by foreign news since the Copenhagen Summit in December 2002. In general, our results support the hypothesis of a deepening euro area influence on the CEEC-3 over time and a corresponding reduction in the relative importance of US shocks.

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File URL: http://hdl.handle.net/10.1007/s10663-010-9153-0
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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 39 (2012)
Issue (Month): 1 (February)
Pages: 19-44

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Handle: RePEc:kap:empiri:v:39:y:2012:i:1:p:19-44

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: Czech Republic; European monetary union; Financial markets; Hungary; Macroeconomic news; Poland; G12; G15; F30;

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References

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  1. David Büttner & Bernd Hayo, 2009. "Determinants of European Stock Market Integration," MAGKS Papers on Economics 200932, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
  3. Hanousek, Jan & Kocenda, Evzen & Kutan, Ali M., 2009. "The reaction of asset prices to macroeconomic announcements in new EU markets: Evidence from intraday data," Journal of Financial Stability, Elsevier, vol. 5(2), pages 199-219, June.
  4. Nikkinen, Jussi & Sahlstrom, Petri, 2004. "Scheduled domestic and US macroeconomic news and stock valuation in Europe," Journal of Multinational Financial Management, Elsevier, vol. 14(3), pages 201-215, July.
  5. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  6. Rui Albuquerque & Clara Vega, 2009. "Economic News and International Stock Market Co-movement," Review of Finance, European Finance Association, vol. 13(3), pages 401-465.
  7. Jarko Fidrmuc & Iikka Korhonen, 2006. "Meta-Analysis of the Business Cycle Correlation between the Euro Area and the CEECs," CESifo Working Paper Series 1693, CESifo Group Munich.
  8. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 523-543, December.
  9. Jan Hanousek & Evžen Kočenda, 2011. "Foreign News and Spillovers in Emerging European Stock Markets," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 170-188, 02.
  10. Kocenda, Evzen & Valachy, Juraj, 2006. "Exchange rate volatility and regime change: A Visegrad comparison," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 727-753, December.
  11. D B�ttner & B. Hayo, 2012. "EMU-related news and financial markets in the Czech Republic, Hungary and Poland," Applied Economics, Taylor & Francis Journals, vol. 44(31), pages 4037-4053, November.
  12. Doornik, Jurgen A. & Ooms, Marius, 2008. "Multimodality in GARCH regression models," International Journal of Forecasting, Elsevier, vol. 24(3), pages 432-448.
  13. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  14. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2006. "Real-time price discovery in global stock, bond and foreign exchange markets," International Finance Discussion Papers 871, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Bernd Hayo & Ali M. Kutan & Matthias Neuenkirch, 2012. "Federal Reserve Communications and Emerging Equity Markets," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 1041-1056, January.
  2. David Büttner & Bernd Hayo, 2009. "News and Correlations of CEEC-3 Financial Markets," MAGKS Papers on Economics 200944, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  3. Birz, Gene & Lott Jr., John R., 2011. "The effect of macroeconomic news on stock returns: New evidence from newspaper coverage," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2791-2800, November.

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