Central bank announcements and realized volatility of stock markets in G7 countries

Štefan Lyócsa, Peter Molnár and Tomáš Plíhal

Journal of International Financial Markets, Institutions and Money, 2019, vol. 58, issue C, 117-135

Abstract: We investigate the impact of monetary policy announcements on stock market volatility in the U.S., Canada, Japan, the U.K., Germany, France and Italy during the 2006–2016 period. More specifically, we study the impact of policy rate and quantitative easing announcements of domestic and foreign central banks on realized volatility before, during, and after the event. We find that on the day of an interest rate announcement of the domestic central bank, volatility increases in a manner that is both statistically and economically significant. We also find a decline in volatility five days after an interest rate announcement across all countries in our sample. We further find that quantitative easing announcements have no impact on stock market volatility not only at but also five days before and five days after the announcement date.

Keywords: Target interest rate; Realized volatility; Central banks; High-frequency data; Monetary policy (search for similar items in EconPapers)
JEL-codes: C22 E44 G14 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:58:y:2019:i:c:p:117-135

DOI: 10.1016/j.intfin.2018.09.010

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