The Impact of Macroeconomic News on US Interest Rates and Stock Indices Conditional on Their Volatility

The Impact of Macroeconomic News on US Interest Rates and Stock Indices Conditional on Their Volatility



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This paper investigates the impact of macroeconomic news on the dynamics of interest rates and stock returns during "low" and "high" volatility periods. These periods are determined by estimating asset dynamics using a SWARCH process. Our results suggest that securities volatility is higher during periods of financial or economic instability. We use these results to evaluate the impact of news during "low" and "high" volatility  periods using a GARCH model. News effects, especially “good” and “large” news, on interest rates are amplified during "high" uncertainty periods. The effect on stock returns is moderate. GARCH parameters differ strongly during both periods.

Keywords: News announcements, interest rate, stock return, market volatility, ARCH-GARCH, ARCH Markov Switching
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Tuysuz, S., & Lubochinsky, C. (2019). The Impact of Macroeconomic News on US Interest Rates and Stock Indices Conditional on Their Volatility. European Journal of Business and Management Research, 4(4). https://doi.org/10.24018/ejbmr.2019.4.4.48

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 Sukriye Tuysuz
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