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US monetary policy announcements and Irish stock market volatility

Author

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  • Don Bredin
  • Caroline Gavin
  • Gerard O'Reilly

Abstract

The influence of foreign monetary policy decisions on the volatility of the Irish stock market is investigated. Specifically, the influence of US monetary policy announcements on the ISEQ is examined. Evidence of the so-called calm before the storm is found, i.e., there appears to be a decline in volatility on the day prior to an FOMC meeting and a subsequent increase in volatility after the results of the FOMC meeting is made known. Also evidence is found to suggest that ISEQ volatility is influenced by surprise changes in US monetary policy. Moreover, US monetary surprises appear to affect Irish stock return volatility asymmetrically with a surprise tightening of US monetary policy leading to an increase in Irish stock return volatility. This paper represents an important step in addressing the issues of spillover identification between the USA and the Irish stock market.

Suggested Citation

  • Don Bredin & Caroline Gavin & Gerard O'Reilly, 2005. "US monetary policy announcements and Irish stock market volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 15(17), pages 1243-1250.
  • Handle: RePEc:taf:apfiec:v:15:y:2005:i:17:p:1243-1250
    DOI: 10.1080/09603100500390836
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    Citations

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    Cited by:

    1. Xinsheng Lu & Ying Zhou & Mingting Kou, 2013. "The Impact of Monetary Policy Surprises on Australian Financial Futures Markets," Working Papers 2013-01, Auckland University of Technology, Department of Economics.
    2. Xinsheng Lu & Ling Qu & Ying Zhou, 2015. "The Impact of Monetary Surprises on Australian Financial Futures Markets: An Insight into Cash Rate Target Announcements," Australian Economic Papers, Wiley Blackwell, vol. 54(3), pages 151-166, September.
    3. Madhuri Malhotra & M. Thenmozhi & Arun Kumar Gopalaswamy, 2011. "Evidence on Changes in Time Varying Volatility around Bonus and Rights Issue Announcements," Working Papers 2011-061, Madras School of Economics,Chennai,India.
    4. Mu-Fen Chao & Shing-Yau Chen, 2012. "A Study of Factors Influencing Foreign Share Holdings in the Taiwan Semiconductor Industry," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 153-170, January.
    5. Mu-Fen Chao & Shing-Yau Chen, 2012. "A Study of Factors Influencing Foreign Share Holdings in the Taiwan Semiconductor Industry," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 153-170, January.
    6. Kim, Suk-Joong & Nguyen, Do Quoc Tho, 2008. "The reaction of the Australian financial markets to the interest rate news from the Reserve Bank of Australia and the U.S. Fed," Research in International Business and Finance, Elsevier, vol. 22(3), pages 378-395, September.
    7. Kim, Suk-Joong & Nguyen, Do Quoc Tho, 2009. "The spillover effects of target interest rate news from the U.S. Fed and the European Central Bank on the Asia-Pacific stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(3), pages 415-431, July.
    8. Tang, Yong & Luo, Yong & Xiong, Jie & Zhao, Fei & Zhang, Yi-Cheng, 2013. "Impact of monetary policy changes on the Chinese monetary and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4435-4449.

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