Does U.S. macroeconomic news make emerging financial markets riskier?

Authors

Esin Cakan, University of New Haven
Nadia Doytch, CUNY Brooklyn CollegeFollow
Kamal P. Upadhyaya, University of New Haven

Document Type

Article

Publication Date

2014

Abstract

This study analyzes the impacts of US macroeconomic announcement surprises on the volatility of twelve emerging stock markets by employing asymmetric GJR-GARCH model. The model includes both positive and negative surprises about inflation and unemployment rate announcements in the U.S. We find that volatility shocks are persistent and asymmetric. Asymmetric volatility increases with bad news on US inflation in five out of the twelve countries studied and it increases with a bad news on U.S. unemployment in four out of twelve countries. Asymmetric volatility decreases with good news about US employment situation in eight countries out of twelve countries. Such markets become less risky with an unexpected decrease in unemployment rate in the US. Our findings are important for demonstrating that USA economic growth and employment situation has an impact on many emerging stock markets and that positive US macroeconomic news in fact make many emerging stock markets less volatile

Comments

This article was originally published in Borsa Istanbul Review, available at https://doi.org/10.1016/j.bir.2014.10.002

This work is distributed under a Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License (CC BY-NC-ND 4.0).