Abstract
This paper investigates the return and volatility response of major European and US equity indices to monetary policy surprises by utilizing extensive intraday data on 5-min price quotes along with a comprehensive dataset on monetary policy decisions and macroeconomic news announcements. The results indicate that the monetary policy decisions generally exert immediate and significant influence on stock index returns and volatilities in both European and the US markets. The findings also show that press conferences held by the European Central Bank (ECB) that follow monetary policy decisions on the same day have a clear impact on European index return volatilities. This implies that they convey additional important information to market participants. Overall, our analysis suggests that the use of high frequency data is critical to separate the effect of monetary policy actions from those of macroeconomic news announcements on stock index returns and volatilities.
| Original language | English |
|---|---|
| Pages (from-to) | 752-764 |
| Number of pages | 13 |
| Journal | Journal of Banking and Finance |
| Volume | 35 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - Mar 2011 |
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Keywords
- Conditional mean
- Conditional volatility
- G14
- G15
- High frequency data
- Macroeconomic news
- Monetary policy
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
Cite this
Simultaneous monetary policy announcements and international stock markets response : An intraday analysis. / Hussain, Syed Mujahid.
In: Journal of Banking and Finance, Vol. 35, No. 3, 03.2011, p. 752-764.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Simultaneous monetary policy announcements and international stock markets response
T2 - An intraday analysis
AU - Hussain, Syed Mujahid
PY - 2011/3
Y1 - 2011/3
N2 - This paper investigates the return and volatility response of major European and US equity indices to monetary policy surprises by utilizing extensive intraday data on 5-min price quotes along with a comprehensive dataset on monetary policy decisions and macroeconomic news announcements. The results indicate that the monetary policy decisions generally exert immediate and significant influence on stock index returns and volatilities in both European and the US markets. The findings also show that press conferences held by the European Central Bank (ECB) that follow monetary policy decisions on the same day have a clear impact on European index return volatilities. This implies that they convey additional important information to market participants. Overall, our analysis suggests that the use of high frequency data is critical to separate the effect of monetary policy actions from those of macroeconomic news announcements on stock index returns and volatilities.
AB - This paper investigates the return and volatility response of major European and US equity indices to monetary policy surprises by utilizing extensive intraday data on 5-min price quotes along with a comprehensive dataset on monetary policy decisions and macroeconomic news announcements. The results indicate that the monetary policy decisions generally exert immediate and significant influence on stock index returns and volatilities in both European and the US markets. The findings also show that press conferences held by the European Central Bank (ECB) that follow monetary policy decisions on the same day have a clear impact on European index return volatilities. This implies that they convey additional important information to market participants. Overall, our analysis suggests that the use of high frequency data is critical to separate the effect of monetary policy actions from those of macroeconomic news announcements on stock index returns and volatilities.
KW - Conditional mean
KW - Conditional volatility
KW - G14
KW - G15
KW - High frequency data
KW - Macroeconomic news
KW - Monetary policy
UR - http://www.scopus.com/inward/record.url?scp=78651431133&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=78651431133&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2010.09.002
DO - 10.1016/j.jbankfin.2010.09.002
M3 - Article
VL - 35
SP - 752
EP - 764
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 3
ER -