Ruhr Economic Papers
Ruhr Economic Papers #500
Discovering and Disentangling Effects of US Macro-Announcements in European Stock Markets
by Tobias R. Rühl and Michael Stein
University Duisburg-Essen, 08/2014, 38 S./p., 8 Euro, ISBN 978-3-86788-574-4 DOI: 10.4419/86788574download
In this study, we analyze the effect of US macroeconomic announcements on European stock returns, return volatility and bid-ask spreads using intraday data. We find that certain announcements are generally more important to the European stock market than others, and that the direction of news is important for returns. We provide first evidence that a stock-individual analysis is crucial to disentangle overall market reactions from stock-specific impacts and that effects vary dramatically between stocks. The analysis of quoted spreads reveals that return volatility affects the spread size positively, and that spreads are systematic ally higher directly after news releases. This is followed by structurally lower spreads, indicating quickly decreasing asymmetric information in the market after announcements. Additionally, spreads tend to react to announcements even if the returns or the volatility of the underlying stock is not significantly affected. This points at the importance of the analysis of news events beyond return and volatility analyses.
JEL-Classification: E44, G14, G15
Keywords: Macroeconomic announcement effects; european stock market; market microstructure; intraday analysis; bid-ask spreads