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Foreign News and Spillovers in Emerging European Stock MarketsEvzen KocendaCharles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); CESifo; University of Michigan at Ann Arbor - The William Davidson Institute; Osteuropa Institut; Centre for Economic Policy Research (CEPR) Jan HanousekCERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) May 1, 2010 William Davidson Institute Working Paper No. 983 Abstract: We analyze foreign news and spillovers in the emerging EU stock markets (the Czech Republic, Hungary, and Poland). We employ high-frequency five-minute intraday data on stock market index returns and four classes of EU and U.S. macroeconomic announcements during 2004–2007. We account for the difference of each announcement from its market expectation and we jointly model the volatility of the returns accounting for intraday movements and day-of-the-week effects. Our findings show that intraday interactions on the new EU markets are strongly determined by mature stock markets as well as the macroeconomic news originating thereby. We show that strong contemporaneous links across markets are present even after controlling for macroeconomic announcements. Finally, in terms of specific announcements, we are able to show the exact sources of macro news spillovers from the developed foreign markets to the three new EU markets under research.
Number of Pages in PDF File: 36 Keywords: finance, intra-day data, macroeconomic news, European emerging stock markets JEL Classification: C52, F36, G15, P59 working papers seriesDate posted: July 28, 2010Suggested CitationContact Information
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