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Foreign News and Spillovers in Emerging European Stock Markets

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  • Evzen Kocenda

    ()

  • Jan Hanousek

    ()

Abstract

We analyze foreign news and spillovers in the emerging EU stock markets (the Czech Republic, Hungary, and Poland). We employ high-frequency five-minute intraday data on stock market index returns and four classes of EU and U.S. macroeconomic announcements during 2004–2007. We account for the difference of each announcement from its market expectation and we jointly model the volatility of the returns accounting for intraday movements and day-of-the-week effects. Our findings show that intraday interactions on the new EU markets are strongly determined by mature stock markets as well as the macroeconomic news originating thereby. We show that strong contemporaneous links across markets are present even after controlling for macroeconomic announcements. Finally, in terms of specific announcements, we are able to show the exact sources of macro news spillovers from the developed foreign markets to the three new EU markets under research.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp983.

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Length: pages
Date of creation: 01 May 2010
Date of revision:
Handle: RePEc:wdi:papers:2010-983

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Keywords: finance; intra-day data; macroeconomic news; European emerging stock markets; volatility;

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  1. Magdalena Morgese Borys & Petr Zemčik, 2011. "Size and Value Effects in the Visegrad Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 47(3), pages 50-68, May.
  2. Egert, Balazs & Kocenda, Evzen, 2007. "Interdependence between Eastern and Western European stock markets: Evidence from intraday data," Economic Systems, Elsevier, Elsevier, vol. 31(2), pages 184-203, June.
  3. Bart Frijns & Dimitris Margaritis, 2008. "Forecasting daily volatility with intraday data," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(6), pages 523-540.
  4. Wang, Jianxin, 2007. "Foreign equity trading and emerging market volatility: Evidence from Indonesia and Thailand," Journal of Development Economics, Elsevier, Elsevier, vol. 84(2), pages 798-811, November.
  5. Thorbecke, Willem, 1997. " On Stock Market Returns and Monetary Policy," Journal of Finance, American Finance Association, American Finance Association, vol. 52(2), pages 635-54, June.
  6. Evzen Kocenda & Jan Hanousek, 2010. "Foreign News and Spillovers in Emerging European Stock Markets," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp983, William Davidson Institute at the University of Michigan.
  7. Schubert, Stefan F & Turnovsky, Stephen J, 2002. "The Dynamics of Temporary Policies in a Small Open Economy," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 10(4), pages 604-22, November.
  8. Torben G. Andersen & Tim Bollerslev, 1998. "Deutsche Mark-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies," Journal of Finance, American Finance Association, American Finance Association, vol. 53(1), pages 219-265, 02.
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