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Effects of Macroeconomic Announcements on Stock Returns across Volatility Regimes

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  • Henry Aray

    ()
    (Department of Economic Theory and Economic History, University of Granada.)

Abstract

Based on a simple Markov regime switching model, this article presents evidence on the effects of macroeconomic announcements on individual stocks returns. The model specification allows two regimes to be distinguished: one with high volatility and the other with low volatility. Considering the level of significance at 5%, the response of stock returns to macroeconomic announcements is much stronger in the low volatility regime. However, the effects of the Fama-French factors on individual stock returns is unambiguously significant in both regimes.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers08_17.pdf
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Bibliographic Info

Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 08/17.

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Length: 10 pages
Date of creation: 30 Dec 2008
Date of revision:
Handle: RePEc:gra:wpaper:08/17

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Keywords: Markov Switching Model; Macroeconomic announcements; Stock Returns.;

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  1. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
  2. RegĂșlez Castillo, Marta & Gardeazabal, Javier, 2002. "A factor model of seasonality in stock returns," DFAEII Working Papers 2002-19, University of the Basque Country - Department of Foundations of Economic Analysis II.
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