Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets

Nowak, Sylwia Barbara; Andritzky, Jochen R.; Jobst, Andreas (Andy); Tamirisa, Natalia T.

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Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets

IMF Working Paper No. 09/147

31 Pages Posted: 4 Aug 2009

See all articles by Sylwia Barbara Nowak

Natalia T. Tamirisa

International Monetary Fund (IMF)

There are 2 versions of this paper

Date Written: July 2009

Abstract

This study characterizes volatility dynamics in external emerging bond markets and examines how prices and volatility respond to news about macroeconomic fundamentals. As in mature bond markets, macroeconomic surprises in external emerging bond markets are found to affect both conditional returns and volatility, with the effects on volatility being more pronounced and longer lasting than those on prices. Yet the process of information absorption tends to be more drawn out than in mature bond markets. International and regional macroeconomic news is at least as important as local news for both asset valuations and volatility dynamics in external emerging bond markets.

Keywords: Asset prices, Bond markets, Bonds, Economic models, Emerging markets, Private investment, Public information, Sovereign debt

Suggested Citation: Suggested Citation

Nowak, Sylwia Barbara and Andritzky, Jochen R. and Jobst, Andreas A. and Tamirisa, Natalia T., Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets (July 2009). IMF Working Paper No. 09/147, Available at SSRN: https://ssrn.com/abstract=1442249