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Title:Return and Volatility Reactions to Monthly Announcements of Business Cycle Forecasts: An Event Study Based on High-Frequency Data PDF Logo
Authors:Steiner, Christian
Groß, Anne
Entorf, Horst
Issue Date:2009
Series/Report no.:ZEW Discussion Papers 09-010
Abstract:This article contributes to the literature on macroeconomic announcements and their impact on asset prices by investigating how the 15-second Xetra DAX returns reflect the monthly announcements of the two best known business cycle forecasts for Germany, i.e. the ifo Business Climate Index and the ZEW Indicator of Economic Sentiment. From the methodological point of view, the main innovation lies in disentangling ‘good' macroeconomics news from ‘bad' news, and, simultaneously, considering time intervals with and without confounding announcements from other sources. Releases from both institutes lead to an immediate response of returns occurring 15 seconds after the announcements, i.e. within the first possible time interval. Announcements of both institutes are also clearly and immediately reflected in the volatility, which remains at a significantly higher level for approximately two minutes slightly elevated for approximately 15 minutes. Combining returns and volatility in a GARCH(1,1)-model, the paper reveals that significant increases in volatility only show up in the presence of simultaneous news released by other sources, whereas return reactions can be observed irrespective of whether confounding announcements are published or not.
Subjects:event study
announcement effect
high-frequency data
intraday data
JEL:E44
G12
G14
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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