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Surprise Effect of Euro Area Macroeconomic Announcements on CIVETS Stock Markets

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  • Laura Wallenius
  • Elena Fedorova
  • Sheraz Ahmed
  • Mikael Collan

Abstract

The macroeconomic announcements and their effects on stock markets are considered to be a measure of stock market integration. Earlier studies show that integrated stock markets exhibit immediate reaction to international macroeconomic news, whereas partially integrated or segmented markets mostly do not react to such announcements. This paper investigates the effect of surprises disguised in the macroeconomic announcements made by the European Monetary Union on CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) stock markets. Daily stock market data starting from January 1, 2007 to December 31, 2012 is analysed. The impact of macroeconomic announcements is estimated by using EGARCH model. The results show that the returns of four out of six CIVETS stock markets significantly react on the day of macroeconomic announcements, whereas the market volatility of all markets is affected due to the EMU's announcements. The results also show that not all types of announcements have significant impact on returns and volatilities in CIVETS, highlighting the importance of the contents of macroeconomic surprises.

Suggested Citation

  • Laura Wallenius & Elena Fedorova & Sheraz Ahmed & Mikael Collan, 2017. "Surprise Effect of Euro Area Macroeconomic Announcements on CIVETS Stock Markets," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(1), pages 55-71.
  • Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:1:id:594:p:55-71
    DOI: 10.18267/j.pep.594
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    More about this item

    Keywords

    macroeconomic announcements; integration; spillovers; emerging markets; CIVETS;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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