What Types of Macroeconomic Announcements Affect Stock Markets in Emerging Eastern Europe?

Abstract

This study considers the impact of foreign and local macroeconomic announcements on emerging Eastern European stock markets. Stock market and macroeconomic news from 2006-2010 for Russia, Poland, Hungary and the Czech Republic are analyzed for differences across countries and to determine whether foreign macroeconomic announcements have a greater impact on stock performance than local macroeconomic news. The direct linkage between stock markets and macroeconomic announcements is found, as well as evidence of integration among the stock markets in emerging Eastern Europe. Macroeconomic news appears to affect local market volatility and, in rare instances, stock returns themselves. Negative news has a leverage effect for emerging Eastern European stock markets, as greater volatility in the stock market is generated by negative news than by positive news. The results of this study have implications for asset pricing and portfolio selection for international financial institutions and for portfolio managers who are assessing their investment decisions with respect to macroeconomic news releases.

Keywords: macroeconomic announcements, stock market integration, spillovers, leverage

JEL Classification: C32, F36, G12, G15