Abstract
This study considers the impact of foreign and local macroeconomic announcements on emerging Eastern European stock markets. Stock market and macroeconomic news from 2006I 2010 for Russia, Poland, Hungary, and the Czech Republic are analyzed for differences across countries and to see if foreign macroeconomic announcements have more impact than local macroeconomic news on stocks. We find a direct linkage of stock markets and macroeconomic announcements, as well as evidence of integration among the stock markets in emerging Eastern Europe. Macroeconomic news appears to affect local market volatility, and in rare instances stock returns themselves. We also find bad news has a leverage effect for emerging Eastern European stock markets, generating greater volatility in the stock market than positive news. The results have implications for asset pricing and portfolio selection for international financial institutions and portfolio managers assessing their investment decisions in light of macroeconomic news releases.
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