Abstract
This paper investigates the impact of US macroeconomic news announcements on the intraday returns of Warsaw Stock Exchange indices. The WSE is the largest and the most liquid stock market among the new European Union member countries. By means of an event study we examine the response of three indices, namely the WIG20, the mWIG40 and the sWGI80, describing the stock price behavior of the largest, medium-sized and small firms, respectively. The results of the empirical analysis show that the stock prices of the largest firms react in the first minute after a news release. This indicates the relatively high efficiency of the WSE. The response of smaller firms’ stock returns is slower but more persistent. The most influential are the announcements of Nonfarm Payrolls describing the US labor market. The indices of the WSE react similarly to good and bad news about the US economy.
Highlights
Globalization means that market participants must take into account domestic information and information from markets around the world
In this paper we examine the impact of US macroeconomic data announcements on indices of the Warsaw Stock Exchange from April 2007 to August 2013
We study the impact of the six following indicators: the Consumer Price Index, Industrial Production, the Producer Price Index, Durable Goods Orders, Retail Sales and Nonfarm Payrolls
Summary
Globalization means that market participants must take into account domestic information and information from markets around the world. Macroeconomic data are a very important source of information about the actual state of real economies but more importantly about their future prospects This implies that macroeconomic news announcements impact investors’ expectations and are the sources of price changes on stock markets. Chen et al (1986) argued that the endogeneity of macroeconomic policy implies that the explanatory power of macroeconomic variables for stock returns is low, there have been a growing number of contributions demonstrating the strong influence of macroeconomic data on stock markets The majority of these studies concern the impact of US macroeconomic data on the US and to a lesser extent on other developed markets (e.g. Schwert 1981; Pearce and Roley 1985; Li and Hu 1998; Nikkinen and Sahlström 2004; Boyd et al 2005; Andersen et al 2007; Harju and Hussain 2011).
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