Research Discussion Papers, Bank of Finland
Syed Mujahid Hussain
Simultaneous monetary policy announcements and international stock markets response: an intraday analysis
Abstract: This paper investigates the return and volatility
responses of major European and the US equity indices to monetary policy
surprises using extensive intraday data on 5-minute price quotes along with
a comprehensive dataset on monetary policy decisions and macroeconomic
news. Our results show that monetary policy decisions generally exert an
immediate and significant influence on stock index returns and volatilities
in both European US markets. Our findings also indicate that European
Central Bank’s (ECB) press conferences following monetary policy decisions
on the same day have define impacts on European index return volatilities,
implying that they convey important information to market participants.
However, in contrast to some earlier evidence, we do not find any support
for the hypothesis that return volatilities in European and US markets are
significantly affected by the path surprises. Overall, our analysis
suggests that the use of high frequency data is critical for separating the
effects of monetary policy actions from those of macroeconomic news
announcements on stock index returns and volatilities.
Keywords: conditional mean; conditional volatility; macroeconomic news; monetary policy; high frequency data; (follow links to similar papers)
JEL-Codes: G14; G15; (follow links to similar papers)
32 pages, March 10, 2010
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