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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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References

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  1. Willem Thorbecke, 1998. "On Stock Market Returns and Monetary Policy," Macroeconomics 9812009, EconWPA.
  2. Magdalena Morgese Borys & Petr Zemcik, 2009. "Size and Value Efects in the Visegrad Countries," CERGE-EI Working Papers wp391, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  3. Wang, Jianxin, 2007. "Foreign equity trading and emerging market volatility: Evidence from Indonesia and Thailand," Journal of Development Economics, Elsevier, vol. 84(2), pages 798-811, November.
  4. Evzen Kocenda & Jan Hanousek, 2010. "Foreign News and Spillovers in Emerging European Stock Markets," William Davidson Institute Working Papers Series wp983, William Davidson Institute at the University of Michigan.
  5. Egert, Balazs & Kocenda, Evzen, 2007. "Interdependence between Eastern and Western European stock markets: Evidence from intraday data," Economic Systems, Elsevier, vol. 31(2), pages 184-203, June.
  6. 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, vol. 53(1), pages 219-265, 02.
  7. Schubert, Stefan F & Turnovsky, Stephen J, 2002. "The Dynamics of Temporary Policies in a Small Open Economy," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 604-22, November.
  8. Bart Frijns & Dimitris Margaritis, 2008. "Forecasting daily volatility with intraday data," The European Journal of Finance, Taylor & Francis Journals, vol. 14(6), pages 523-540.
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Citations

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Cited by:
  1. Égert, Balázs & Kočenda, Evžen, 2014. "The impact of macro news and central bank communication on emerging European forex markets," Economic Systems, Elsevier, vol. 38(1), pages 73-88.
  2. Jan Hanousek & Evzen Kocenda & Jan Novotny, 2014. "Price jumps on European stock markets," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 14(1), pages 10-22, March.
  3. Horvath, Roman & Petrovski, Dragan, 2013. "International stock market integration: Central and South Eastern Europe compared," Economic Systems, Elsevier, vol. 37(1), pages 81-91.
  4. Baumöhl, Eduard, 2013. "Stock market integration between the CEE-4 and the G7 markets: Asymmetric DCC and smooth transition approach," MPRA Paper 43834, University Library of Munich, Germany.
  5. Hubert Gabrisch & Lucjan T Orlowski, 2011. "Extreme Risks in Financial Markets and Monetary Policies of the Euro-Candidates," Comparative Economic Studies, Palgrave Macmillan, vol. 53(4), pages 511-534, December.
  6. Evzen Kocenda & Jan Hanousek, 2010. "Foreign News and Spillovers in Emerging European Stock Markets," William Davidson Institute Working Papers Series wp983, William Davidson Institute at the University of Michigan.
  7. Krenar Avdulaj & Jozef Barunik, 2013. "Can we still benefit from international diversification? The case of the Czech and German stock markets," Papers 1308.6120, arXiv.org, revised Sep 2013.
  8. Tomas Adam & Sona Benecka, 2013. "Financial Stress Spillover and Financial Linkages between the Euro Area and the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(1), pages 46-64, March.
  9. Gjika, Dritan & Horváth, Roman, 2013. "Stock market comovements in Central Europe: Evidence from the asymmetric DCC model," Economic Modelling, Elsevier, vol. 33(C), pages 55-64.
  10. Stavarek, Daniel & Heryan, Tomas, 2012. "Day of the week effect in central European stock markets," MPRA Paper 38431, University Library of Munich, Germany.
  11. David Büttner & Bernd Hayo & Matthias Neuenkirch, 2009. "The Impact of Foreign Macroeconomic News on Financial Markets in the Czech Republic, Hungary, and Poland," MAGKS Papers on Economics 200903, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  12. repec:wdi:papers:2011-1028 is not listed on IDEAS
  13. 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.
  14. Dritan Gjika & Roman Horvath, 2012. "Stock Market Comovements in Central Europe: Evidence from Asymmetric DCC Model," William Davidson Institute Working Papers Series wp1035, William Davidson Institute at the University of Michigan.
  15. Joanna Olbrys, 2013. "Price and Volatility Spillovers in the Case of Stock Markets Located in Different Time Zones," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 49(S2), pages 145-157, March.

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