TY - JOUR
T1 - Simultaneous monetary policy announcements and international stock markets response
T2 - An intraday analysis
AU - Hussain, Syed Mujahid
N1 - Funding Information:
The econometric analysis for this paper was carried out during my stay as a visiting researcher at the Bank of Finland, Helsinki, Finland. This paper has greatly benefited from discussions at the research seminars of Bank of Finland. I particularly wish to thank Jouko Vilmunen, Esa Jokivuolle, Matti Viren and other seminar participants. Eva Liljeblom, Timo Korkeamäki, Anders Löflund, Johan Knif, Salla Pöyry and my colleague Sheraz Ahmed also provided useful comments. I also wish to thank an anonymous referee for very valuable comments and suggestions on earlier version of this paper. I am grateful to Olsen & Associates for providing the stock market data. The financial support from Hanken Foundation and OP-Pohjola-rhymän tutkimussäätiö is gratefully acknowledged. The remaining errors are my own.
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
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U2 - 10.1016/j.jbankfin.2010.09.002
DO - 10.1016/j.jbankfin.2010.09.002
M3 - Article
AN - SCOPUS:78651431133
SN - 0378-4266
VL - 35
SP - 752
EP - 764
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 3
ER -