Abstract
This paper examines the immediate impacts of political and economic news on the mean and volatility of returns of stocks traded in an emerging market, Istanbul Stock Exchange, by using intraday data. Both domestic and foreign news are collected from the Reuters Turkish language news service for the period between August 1, 2002 and March 31, 2003, and they are divided into four news categories: domestic economic, foreign economic, domestic political and foreign political. Three GARCH (1,1) models are estimated by using the 15-minute returns on the ISE-100 index with dummy variables representing seasonal factors and news categories. The results indicate that both mean and volatility of returns increase immediately with domestic political news. Moreover, domestic economic and foreign political news items are found to have no significant immediate impact on the ISE100 index. Lastly, foreign economic news items are found to increase only mean returns significantly. These results suggest that investors should consider domestic political factors in investing in emerging markets.
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