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

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  • 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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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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  1. David Büttner & Bernd Hayo, 2009. "Determinants of European Stock Market Integration," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200932, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Nikkinen, Jussi & Sahlstrom, Petri, 2004. "Scheduled domestic and US macroeconomic news and stock valuation in Europe," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 14(3), pages 201-215, July.
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  5. 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, Board of Governors of the Federal Reserve System (U.S.) 871, Board of Governors of the Federal Reserve System (U.S.).
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  7. D B�ttner & B. Hayo, 2012. "EMU-related news and financial markets in the Czech Republic, Hungary and Poland," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(31), pages 4037-4053, November.
  8. 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.
  9. 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.
  10. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  11. 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.
  12. Rui Albuquerque & Clara Vega, 2009. "Economic News and International Stock Market Co-movement," Review of Finance, European Finance Association, European Finance Association, vol. 13(3), pages 401-465.
  13. 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.
  14. Doornik, Jurgen A. & Ooms, Marius, 2008. "Multimodality in GARCH regression models," International Journal of Forecasting, Elsevier, Elsevier, vol. 24(3), pages 432-448.
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Cited by:
  1. Büttner, David & Hayo, Bernd, 2010. "News and correlations of CEEC-3 financial markets," Economic Modelling, Elsevier, vol. 27(5), pages 915-922, September.
  2. 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.
  3. 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.

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