Abstract
We examine the impact of economic news releases on returns, volatility and jumps of the stock and foreign exchange markets of South Africa. We also assess the impact of macroeconomic determinants. The dataset range is fifteen years covering the period from January, 2000 to December, 2014. Results are robust to different sub-periods before and after the global financial crisis of 2008. Volatility is estimated with the use of the median realized variance estimator (Andersen et al., 2012). Jumps are detected and estimated as in Duong and Swanson (2015). The impact of the announcements is assessed building on the study by Huang et al. (2015). Returns, volatility and jumps of both stock and foreign exchange markets are significantly explained nationally by macroeconomic fundamentals and economic news releases.
Highlights
Investors are interested in any new information arrival in financial markets
The objective of this paper is to study the predictive ability of economic news releases and macroeconomic determinants on returns, volatility and jumps of the stock and foreign exchange markets of South Africa
The results of the impact of the South African economic news releases on South African stock and foreign exchange markets on monthly returns, volatility and jumps series of the South African foreign exchange market are presented on Panel A of Table 3 for the equity market and in Panel B
Summary
Investors are interested in any new information arrival in financial markets. The detection of any new information helps prediction. The most common type of such information is unexpected events causing stock market anomalies Such events affect returns, dispersion (volatility) and discontinuities (jumps). This is why financial markets show unexpected behavior on days with economic news. McQueen and Roley (1993); Fleming and Remolona (1997, 1999) and Andersen et al (2007), among others, studied whether economic news releases affect asset prices. These papers have showed strong evidence that macroeconomic announcement do affect financial markets. There are several studies that investigate the impact of economics news on financial markets
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