Prague Economic Papers 2017, 26(1):55-71 | DOI: 10.18267/j.pep.594

Surprise Effect of Euro Area Macroeconomic Announcements on CIVETS Stock Markets

Laura Wallenius1, Elena Fedorova2, Sheraz Ahmed3, Mikael Collan4
1 School of Business and Management, Lappeenranta University of Technology, Lappeenranta, Finland (laura.wallenius@lut.fi)
2 School of Business and Management, Lappeenranta University of Technology, Lappeenranta, Finland (elena.fedorova@lut.fi)
3 School of Business and Management, Lappeenranta University of Technology, Lappeenranta, Finland (sheraz.ahmed@lut.fi)
4 School of Business and Management, Lappeenranta University of Technology, Lappeenranta, Finland (mikael.collan@lut.fi)

The macroeconomic announcements and their effects on stock markets are considered to be a measure of stock market integration. Earlier studies show that integrated stock markets exhibit immediate reaction to international macroeconomic news, whereas partially integrated or segmented markets mostly do not react to such announcements. This paper investigates the effect of surprises disguised in the macroeconomic announcements made by the European Monetary Union on CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) stock markets. Daily stock market data starting from January 1, 2007 to December 31, 2012 is analysed. The impact of macroeconomic announcements is estimated by using EGARCH model. The results show that the returns of four out of six CIVETS stock markets significantly react on the day of macroeconomic announcements, whereas the market volatility of all markets is affected due to the EMU's announcements. The results also show that not all types of announcements have significant impact on returns and volatilities in CIVETS, highlighting the importance of the contents of macroeconomic surprises.

Keywords: macroeconomic announcements, integration, spillovers, emerging markets, CIVETS
JEL classification: C32, F36, G12, G15

Prepublished online: July 13, 2016; Published: February 1, 2017  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Wallenius, L., Fedorova, E., Ahmed, S., & Collan, M. (2017). Surprise Effect of Euro Area Macroeconomic Announcements on CIVETS Stock Markets. Prague Economic Papers, 26(1), 55-71. doi: 10.18267/j.pep.594
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Andersen, T. G., Bollerslev, T., Diebold, F. X., Vega, C. (2007). Real -Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets. Journal of International Economics, 73(2), 251-277. DOI: 10.1016/j.jinteco.2007.02.004. Go to original source...
    2. Balduzzi, P., Elton, E. J., Green, T. C. (2001). Economic News and Bond Prices: Evidence from the U.S. Treasury Market. The Journal of Financial & Quantitative Analysis, 36(4), 523-543. DOI: 10.2307/2676223. Go to original source...
    3. Bekaert, G., Harvey, C. R. (1995). Time -Varying World Market Integration. The Journal of Finance, 50(2), 403-444. DOI: 10.1111/j.1540 -6261.1995.tb04790.x. Go to original source...
    4. Bollerslev, T., Cai, J., Song, F. M. (2000). Intraday Periodicity, Long Memory Volatility, and Macroconomic Announcement Effects in the US Treasury Bond Market. Journal of Empirical Finance, 7(1), 37-55. DOI: 10.1016/S0927 -5398(00)00002 -5. Go to original source...
    5. Brooks, C. (2005). Introductory Econometrics for Finance. 6th Ed. Cambridge: The University Press. DOI: 10.1017/CBO9780511841644. Go to original source...
    6. Dark, J., Raghavan, M., Kamepalli, A. (2008). Return and Volatility Spillovers between the Foreign Exchange Market and the Australian All Ordinaries Index. The Journal of Applied Finance, 14(1), 41-48.
    7. Engle, R., Kroner, K. (1995). Multivariate Simultaneous Generalized ARCH. Econometric Theory, 11(1), 122-150. DOI: 10.1017/S0266466600009063. Go to original source...
    8. Fedorova, E., Vaihekoski, M. (2009). Global and Local Sources of Risk in Eastern European Emerging Stock Markets. Czech Journal of Economics and Finance, 59, 2-19. Go to original source...
    9. Francis, B., Hasan, I., Hunter, D. (2006). Dynamic Relations between International Equity and Currency Markets: The Role of Currency Order Flow. Journal of Business, 79, 219-257. DOI: 10.1086/497417. Go to original source...
    10. Graham, M., Nikkinen, J., Sahlström, P. (2003). Relative Importance of Scheduled Macroeconomic News for Stock Market Investors. Journal of Economics & Finance, 27(2), 153-165. DOI: 10.1007/BF02827216. Go to original source...
    11. Hamao, Y., Masulis, R., Ng, V. (1990). Correlations in Price Changes and Volatility across International Stock Markets. Review of Financial Studies, 3, 281-307. DOI: 10.1093/rfs/3.2.281. Go to original source...
    12. Hanousek, J., Koèenda, E. (2011). Foreign News and Spillovers in Emerging European Stock Markets. Review of International Economics, 19(1), 170-188. DOI: 10.1111/j.1467 -9396.2010.00939.x. Go to original source...
    13. Hanousek, J., Koæenda, E., Kutan, A. M. (2009). The Reaction of Asset Prices to Macroeconomic Announcements in New EU Markets: Evidence from Intraday Data. Journal of Financial Stability, 5(2), 199-219. DOI: 10.1016/j.jfs.2008.01.003. Go to original source...
    14. Harju, K., Hussain, S. M. (2011). Intraday Seasonalities and Macroeconomic Announcements. European Financial Management, 17(2), 367-390. DOI: 10.1111/j.1468 -036X.2009.00512.x. Go to original source...
    15. Hussainey, K., Ngoc, L. K. (2009). The Impact of Macroeconomic Indicators on Vietnamese Stock Prices. The Journal of Risk Finance, 10(4), 321-332. DOI: 10.1108/15265940910980632. Go to original source...
    16. Jiang, G., Konstantinidi, E., Skiadopoulos, G. (2012). Volatility Spillovers and the Effect of News Announcements. Journal of Banking & Finance, 36(8), 2260-2273. DOI: 10.1016/j.jbankfin.2012.04.006. Go to original source...
    17. Johnson, S. (2008). Emerging Markets Emerge. Finance & Development - A Quarterly Magazine of the IMF, 45(3), 54-55.
    18. Karolyi, G. (1995). A Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada. Journal of Business and Economic Statistics, 13, 11-25. DOI: 10.1080/07350015.1995.10524575. Go to original source...
    19. Kasch -Haroutounian, M., Price, S. (2001). Volatility in the Transition Markets of Central Europe. Applied Financial Economics, 11, 93-105. DOI: 10.1080/09603100150210309. Go to original source...
    20. Kim, S. -J., Mckenzie, M., Faff, R. (2004). Macroeconomic News Announcements and the Role of Expectations: Evidence for US Bond, Stock and Foreign Exchange Markets. Journal of Multinational Financial Management, 14(4), 217-232. DOI: 10.1016/j.mulfin.2003.02.001. Go to original source...
    21. Korkmaz, T., Cevik, E. I., Atukeren, E. (2012). Return and Volatility Spillovers among CIVETS Stock Markets. Emerging Markets Review, 13(2), 230-252. DOI: 10.1016/j.ememar.2012.03.003. Go to original source...
    22. Koutmos, G., Booth, G. G. (1995). Asymmetric Volatility Transmission in International Stock Markets. Journal of International Money & Finance, 14(6), 747-762. DOI: 10.1016/0261 -5606(95)00031 -3. Go to original source...
    23. Li, H. (2007). International Linkages of the Chinese Stock Exchanges: A Multivariate GARCH Analysis. Applied Financial Economics, 17, 285-297. DOI: 10.1080/09603100600675557. Go to original source...
    24. Li, H., Majerowska, E. (2008). Testing Stock Market Linkages from Poland and Hungary: A Multivariate GARCH Approach. Research in International Business and Finance, 22, 247-266. DOI: 10.1016/j.ribaf.2007.06.001. Go to original source...
    25. Lin, W., Engle, R., Ito, T. (1994). Do Bulls and Bears Move across Borders? International Transmission of Stock Returns and Volatility. Review of Financial Studies, 7, 507-538. DOI: 10.1093/rfs/7.3.507. Go to original source...
    26. Lucey, B., Voronkova, S. (2006). The Relationship between Emerging European and Developed Stock Markets before and after the Russian Crisis of 1997-1998. International Finance Review, 6, 383-413. DOI: 10.1016/S1569 -3767(05)06015 -2. Go to original source...
    27. Morales, L. (2008). Volatility Spillovers between Equity and Currency Markets: Evidence from Major Latin American Countries. Cuadernos de Economia, 45, 185-215.
    28. Nelson, D. (1991). Conditional Heteroscedasticity in Asset Returns: A New Approach. Econometrica, 59(2), 347-370. DOI: 10.2307/2938260. Go to original source...
    29. Nguyen, T. (2011). US Macroeconomic News Spillover Effects on Vietnamese Stock Market. The Journal of Risk Finance, 12(5), 389-399. DOI: 10.1108/15265941111176127. Go to original source...
    30. Nikkinen, J., Omran, M., Sahlström, P., Äijö, J. (2006). Global Stock Market Reactions to Scheduled U.S. Macroeconomic News Announcements. Global Finance Journal, 17(1), 92-104. DOI: 10.1016/j.gfj.2006.06.003. Go to original source...
    31. Nofsinger, J. R., Prucyk, B. (2003). Option Volume and Volatility Response to Scheduled Economic News Releases. Journal of Futures Markets, 23(4), 315-345. DOI: 10.1002/fut.10064. Go to original source...
    32. Nowak, S., Andritzky, J., Jobst, A., Tamirisa, N. (2011). Macroeconomic Fundamentals, Price Discovery, and Volatility Dynamics in Emerging Bond Markets. Journal of Banking & Finance, 35(10), 2584-2597. DOI: 10.1016/j.jbankfin.2011.02.012. Go to original source...
    33. Önder, Z., Simga -Mugan, C. (2006). How Do Political and Economic News Affect Emerging Markets? - Evidence from Argentina and Turkey. Emerging Markets Finance & Trade, 42(4), 50-77. DOI: 10.2753/REE1540 -496X420403. Go to original source...
    34. Rangel, J. (2011). Macroeconomic News, Announcements, and Stock Market Jump Intensity Dynamics. Journal of Banking and Finance, 35(5), 1263-1276. DOI: 10.1016/j.jbankfin.2010.10.009. Go to original source...
    35. Scheicher, M. (2001). The Comovements of Stock Markets in Hungary, Poland and the Czech Republic. International Journal of Finance and Economics, 6, 27-39. DOI: 10.1002/ijfe.141. Go to original source...
    36. Sola, M., Spagnolo, F., Spagnolo, N. (2002). A Test for Volatility Spillovers. Economics Letters, 76, 77-84. DOI: 10.1016/S0165 -1765(02)00027 -7. Go to original source...
    37. Susmel, R., Engle, R. (1994). Hourly Volatility Spillovers between International Equity Markets. Journal of International Money and Finance, 13, 3-25. DOI: 10.1016/0261 -5606(94)90021 -3. Go to original source...
    38. Syriopoulos, T. (2006). Risk and Return Implications from Investing in Emerging European Stock Markets. Journal of International Financial Markets, Institutions and Money, 16, 283-299. DOI: 10.1016/j.intfin.2005.02.005. Go to original source...
    39. Tai, C. (2007). Market Integration and Contagion: Evidence from Asian Emerging Stock and Foreign Exchange Markets. Emerging Markets Review, 8, 264-283. DOI: 10.1016/j.ememar.2006.09.011. Go to original source...
    40. Theodossion, P., Lee, U. (1993). Mean and Volatility Spillovers across Major National Stock Markets: Further Empirical Evidence. Journal of Financial Research, 16, 337-350. DOI: 10.1111/j.1475 -6803.1993.tb00152.x. Go to original source...
    41. Yang, S., Doong, S. (2004). Price and Volatility Spillovers between Stock Prices and Exchange Rates: Empirical Evidence from the G -7 Countries. International Journal of Business and Economics, 3, 139-153.
    42. Yang, Y., Chang, C. (2008). A Double-Threshold GARCH Model of Stock Market and Currency Shocks on Stock Returns. Mathematics and Computers in Simulation, 79, 458-474. DOI: 10.1016/j.matcom.2008.01.048. Go to original source...
    43. Yi, Y., Qi, W., Wu, D. (2013). Are CIVETS the Next BRICs? A Comparative Analysis from Scientometrics Perspective. Scientometrics, 94(2), 615-628. DOI: 10.1007/s11192-012-0791-9. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content