Asymmetries and the effects of macroeconomic news on stock market volatility: an empirical examination of the Warsaw stock market

摘要

In this paper the volatility of the Polish stock market over the period 1991 to 1997 is investigated using the GARCH estimation method. Over this period the Warsaw stock exchange was re-established, in addition to financial sector reform, the modernization of corporate enterprises, the restructuring of the Polish economy and the gradual listing of newly privatized firms on the market. As a result of these developments, it would be expected that macroeconomic news announcements on inflation, money supply figures, and industrial production would bear influence on stock prices. One means of assessing the effect of macroeconomic news on stock prices is by investigating stock market volatility, with particular emphasis on its main drivers and responses to shocks. Using daily returns on the WIG index, the evidence points to substantial asymmetries in the dynamics of daily price changes within the market while additional tests on monthly data indicate that the volatility process is strongly conditioned by the impact of macroeconomic news. It is also discovered that forecasts for inflation and growth of the monetary base are significant factors having a strong impact on market volatility.