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The Impact of U.S. Central Bank Communication on European and Pacific Equity Markets

  • Bernd Hayo

    ()

    (Philipps-University Marburg)

  • Ali M. Kutan

    ()

    (Southern Illinois University, Edwardsville; The Emerging Markets Group, London; William Davidson Institute, Michigan)

  • Matthias Neuenkirch

    ()

    (Philipps-University Marburg)

We examine the effects of U.S. federal funds target rate changes and all types of FOMC communication on European and Pacific equity market returns using a GARCH model. We show that both types of news have a significant impact, but that the effects are not symmetric: although several communication variables are statistically significant, target rate changes have an economically more important impact. European markets are influenced by a greater variety of FOMC communications than Pacific markets.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/27-2009_hayo.pdf
File Function: Second version, 2010
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200927.

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Length: 10 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200927
Contact details of provider: Postal: Universitätsstraße 25, 35037 Marburg
Phone: 06421/28-1722
Fax: 06421/28-4858
Web page: http://www.uni-marburg.de/fb02/
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  1. Nikkinen, Jussi & Omran, Mohammed & Sahlstrom, Petri & Aijo, Janne, 2006. "Global stock market reactions to scheduled U.S. macroeconomic news announcements," Global Finance Journal, Elsevier, vol. 17(1), pages 92-104, September.
  2. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Conover, C. Mitchell & Jensen, Gerald R. & Johnson, Robert R., 1999. "Monetary environments and international stock returns," Journal of Banking & Finance, Elsevier, vol. 23(9), pages 1357-1381, September.
  4. Michael Ehrmann & Marcel Fratzscher, 2007. "Communication by Central Bank Committee Members: Different Strategies, Same Effectiveness?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 509-541, 03.
  5. Joshua Hausman & Jon Wongswan, 2006. "Global asset prices and FOMC announcements," International Finance Discussion Papers 886, Board of Governors of the Federal Reserve System (U.S.).
  6. Ehrmann, Michael & Fratzscher, Marcel, 2004. "Taking stock: monetary policy transmission to equity markets," Working Paper Series 0354, European Central Bank.
  7. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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