Do Macroeconomic Announcements Cause Asymetric Volatility?
In this paper we study the impact of macroeconomic news announcements on the conditional volatility of stock and bond returns. Using daily returns on the S&P 500 index, the NASDAQ index, and the 1 and 10 year U.S. Treasury bonds, for January 1982 - August 2001, some interesting results emerge. Announcement shocks appear to have a strong impact on the (dynamics of) bond and stock market volatility. Our results provide empirical evidence thatasymmetric volatility in the Treasury bond market can be largely explained by these macroeconomic announcement shocks. This suggests that the asymmetric volatility found in government bond markets are likely due to misspecification of the volatility model. After including macroeconomic announcements into the model, the asymmetry disappears. Becausefirm-specific news is the most important source of information in the stock market, the asymmetries in stock volatility do not disappear after incorporating macroeconomic announcements into the volatility model.
|Announcement Effects, Asymmetry, Multivariate GARCH, Stock and Bond Market, Time-Varying Covariances|
|Time-Series Models; Dynamic Quantile Regressions (jel C22), Asset Pricing (jel G12), Corporate Finance and Governance (jel G3), Business Administration and Business Economics; Marketing; Accounting (jel M)|
|Erasmus Research Institute of Management|
|ERIM Report Series Research in Management|
|Copyright 2002, P. DeGoeij, W. Marquering, This report in the ERIM Report Series Research in Management is intended as a means to communicate the results of recent research to academic colleagues and other interested parties. All reports are considered as preliminary and subject to possibly major revisions. This applies equally to opinions expressed, theories developed, and data used. Therefore, comments and suggestions are welcome and should be directed to the authors.|
|Organisation||Erasmus Research Institute of Management|
de Goeij, P, & Marquering, W.A. (2002). Do Macroeconomic Announcements Cause Asymetric Volatility? (No. ERS-2002-103-F&A). ERIM Report Series Research in Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/254