The spillover effects of US and Japanese public information news in advanced Asia-Pacific stock markets

Abstract

This paper investigates the nature of information leadership of the US and Japan in the advanced Asia-Pacific stock markets. Instead of just relying on return and return volatility spillovers from major markets, specific and disaggregated news events are also utilized. In particular, the aim is to examine the nature of spillover effects of scheduled announcements of the US and Japanese macroeconomic variables in the advanced Asia-Pacific stock markets of Australia, Hong Kong and Singapore for the period 2 January 1991 to 31 May 1999. The investigation reveals that both US and Japanese announcement news elicit significant first and second moment influences on the returns of the other markets, in general, and that there is a complex array of significant market responses to various news announcements. There is also strong evidence of markets responding differently to bad news announcements compared to overall news (including both good and bad news) announcements which indicate that the information content of each economic announcement is a source of tradable information rather than the act of releasing economic figures. Thus, this paper contributes to the literature by shedding light on the important drivers of the documented information leadership of the US and Japanese stock markets.