The Reaction of Asset Prices to Macroeconomic Announcements in New EU Markets: Evidence from Intraday Data

CERGE-EI Working Paper No. 349

33 Pages Posted: 26 Mar 2008

See all articles by Jan Hanousek

Jan Hanousek

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Charles University in Prague; Academy of Sciences of the Czech Republic; Centre for Economic Policy Research (CEPR)

Evžen Kočenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Ali M. Kutan

Southern Illinois University at Edwardsville

Date Written: March 2008

Abstract

We estimate the impact of macroeconomic news on composite stock returns in three emerging European Union financial markets (the Budapest BUX, Prague PX-50, and Warsaw WIG-20), using intraday data and macroeconomic announcements. Our contribution is twofold. We employ a larger set of macroeconomic data releases than used in previous studies and also use intraday data, an excess impact approach, and foreign news to provide more reliable inferences. Composite stock returns are computed based on five-minute intervals (ticks) and macroeconomic news are measured based on the deviations of the actual announcement values from their expectations. Overall, we find that all three new EU stock markets are subject to significant spillovers directly via the composite index returns from the EU, the U.S. and neighboring markets; Budapest exhibits the strongest spillover effect, followed by Warsaw and Prague. The Czech and Hungarian markets are also subject to spillovers indirectly through the transmission of macroeconomic news. The impact of EU-wide announcements is evidenced more in the case of Hungary, while the Czech market is more impacted by U.S. news. The Polish market is marginally affected by EU news. In addition, after decomposing pooled announcements, we show that the impact of multiple announcements is stronger than that of single news. Our results suggest that the impact of foreign macroeconomic announcements goes beyond the impact of the foreign stock markets on Central and Eastern European indices. We also discuss the implications of the findings for financial stability in the three emerging European markets.

Keywords: stock markets, intraday data, macroeconomic announcements, European Union, volatility, excess impact of news

JEL Classification: C52, F36, G15, P59

Suggested Citation

Hanousek, Jan and Kocenda, Evzen and Kutan, Ali M., The Reaction of Asset Prices to Macroeconomic Announcements in New EU Markets: Evidence from Intraday Data (March 2008). CERGE-EI Working Paper No. 349. Available at SSRN: https://ssrn.com/abstract=1113089 or http://dx.doi.org/10.2139/ssrn.1113089

Jan Hanousek (Contact Author)

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

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Charles University in Prague ( email )

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Evzen Kocenda

Charles University in Prague - Institute of Economic Studies ( email )

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Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

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CESifo

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University of Regensburg - Institute for East and Southeast European Studies

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University of Michigan at Ann Arbor - The William Davidson Institute

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Ali M. Kutan

Southern Illinois University at Edwardsville ( email )

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Edwardsville, IL 62026-1102
United States
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618-650-3047 (Fax)

HOME PAGE: http://https://ideas.repec.org/e/pku30.html

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