Do Macroeconomic Announcements Cause Asymmetric Volatility?

IN MY judgment," maintained William McChesney Martin, Jr., Chairman of the Board of Governors, Federal Reserve System, "we can never under the present margin regulations have the same result that occurred in terms of a financial crash in 1929 through undermargined accounts, low margins resulting in a financial debacle."' A widely used elementary economics textbook claimed, "Margin requirements have exercised an important restrictive influence on security speculation, as contrasted with the uncontrolled period of the late 1920's... Nearly everyone agrees that Federal Reserve margin requirements exercise a healthy restraint on speculative stock purchases in a boom" (Bach, 1963, p. 116). But what evidence is there that margin requirements have the effects claimed? At the December meetings of the American Economic Association, George J. Stigler, in the Presidential address, called on economists to test their assumptions that state regulation of private activity has indeed been successful (Stigler, 1965). This article brings together some data on the efficacy of margin requirements. While the figures can only be considered preliminary, and more data should be collected to test margin requirements, the data that are available and presented here indicate that not one of the aims of the legislation establishing margin requirements has been accomplished.2

Arbitrage strategy is one of the basic trading strategies in the Treasury bond futures market. It makes futures price reflect the trend of spot market more reasonably. It can also help to increase flexibility of China's Treasury bond market. Still in the early stage, the Chinese Treasury bond futures market provides apparent arbitrage opportunities. However, in practical operation of basis arbitrage trading of Treasury bond futures, transactions in the Treasury bond spot market are not as frequent as expected, making it difficult to take actions when arbitrage opportunities arise. To solve this problem, instead of using Treasury bond spot, we use Treasury bond ETF (Exchange-Traded Fund) in our Treasury bond future-spot arbitrage strategy research. Our study illustrates the forward basis arbitrage opportunities on the basis of price trends and spreads expansion.

Availability of high-frequency exchange rate data for researchers has improved technical details and statistical accuracy of exchange rate research in recent years. Based on an event-study analysis and time series methodology, this chapter shows the intraday pattern of dollar/yen transaction activities, predictability of exchange rate movements and impact of macroeconomic news announcements on returns in minute(s) after the announcement.

Macroeconomic are important variables influencing volatility in the bond market. Some of the challenges faced such as default risk, liquidity risk, interest rate risk, inflation risk, and exchange rate risk. This study is aimed at examining asymmetric volatility using the EGARCH model and at estimating macroeconomic variables which influence the return of Indonesian Government bonds. The asymmetric volatility can be measured by determining the best order value of the EGARCH model. Based on the findings of the study, EGARCH (2.1) is the best model for assessing volatility in short-term SUN returns, EGARCH (3.1) for medium-term SUN and EGARCH (2.3) for the long term. The asymmetric volatility pertains in the returns of short, medium and long-term government bonds. In addition, the negative information has a greater impact than positive information in the short, medium and long term. The deposit rate and return of the Composite Stock Price Index have a significant positive effect on short, medium and long term bond returns. The effective federal funds rate or FED interest rate has a significant positive effect on the return of short and long-term SUN bonds while in the medium term it has no effect. Exchange rates have a significant negative effect on short, medium and long term bond returns.

This paper studies daily and monthly returns in the Colombo Stock Exchange (CSE) in order to identify dynamics of return series and find out whether asymmetric volatility exists in the market. The study is carried out employing symmetric GARCH model, EGARCH model and GARCH-M model with a sample period from January 1998 to June 2009. It was found that daily return exhibits ARCH effect and it is not normally distributed. The monthly return series found to be normally distributed and it does not exhibit ARCH effect. In-depth analysis on daily return using symmetric GARCH model has supported the fact that the daily return shows time-varying volatility with high persistence and predictability. Asymmetric EGARCH model has found the presence of asymmetric volatility indicating that the market reacts more to a negative than shock a positive shock of the same size. It was also found that risk-return relationship is not statistically significant, though it was found to be positive. These findings would be useful to policy makers, stock brokers and the investors in pricing, hedging and portfolio management and these models could be used to estimate and forecast volatility for risk management decision making at CSE. DOI: <a href="http://dx.doi.org/10.4038/ss.v40i1.4680">http://dx.doi.org/10.4038/ss.v40i1.4680</a> Staff Studies – Volume 40 Numbers 1 &amp; 2, 37-57

Macroeconomic Impact on Stock Market Returns and Volatility: Evidence from Sri Lanka

In 2020, with the rapid spread of the epidemic worldwide, the financial markets of the United States and other countries experienced a huge impact rarely seen in history. This paper focuses on analyzing the impact of COVID-19 on the US economic situation and the bond market. It explores the potential logic of some US government policies to deal with the impact of COVID-19 on the bond market. In addition, this paper also compares and analyzes policies with real-time data to judge the effectiveness of various policies. Currently, the US government actively implements monetary and fiscal policies and prudently responds to the negative effects of these policies. The large-scale purchase of government bonds and the corresponding quantitative easing policy are gradually started among them. These changes effectively controlled the indicators of the US bond market. At the same time, some other policies are carefully managing risks, such as a spike in inflation. Finally, the United States successfully reduced the economic losses caused by the epidemic and survived the crisis.

This study analyzes the impact of macroeconomic announcements on the conditional volatility of Japanese government bond (JGB) futures returns. As information technology continues to develop, the arrival and the processing of new market-related information becomes more rapid. Using high-frequency data of JGB futures, we find that announcement shocks influence the dynamics of bond market volatility. Our results provide empirical evidence that the JGB futures market does not immediately incorporate implications of macroeconomic announcement news. Volatility of JGB futures returns persists for a while. Moreover, after distinguishing among types of shocks, volatility is asymmetric. Negative shocks have a stronger impact on subsequent volatility than do positive shocks.

Using daily data we show sudden, extreme declines in the U.S. stock market for crash dates to lead to a capital preserving (as opposed to strategic or tactical) reallocation to government debt securities. In most cases we find flight-induced reallocation reverses direction within one day of a crash. However, for the 1987 world crash we find increased and persistent return volatility in both equity and bond returns lasting up to five days following this dramatic decline in world equity prices. Like previous research in this area, we find equity crashes alter long-run stock/bond return correlations and lead to increased stock and bond return volatility. Finally, we describe the somewhat unique stock and bond correlation adjustments triggered by the 9/11 attack and the impact this event had on the behavior of U.S. equity investors’ flight-to-safety reaction.

본 연구의 목적은 미국 FRB의 정책금리조정 영향이 국내 국고채 채권시장에 어떤 영향을 미치는 가를 실증 분석하는 것이다. 본 연구를 통해 얻은 결론은 다음과 같다. 우선, 첫째, 미국 정책금리 변경 효과가 국내 채권시장에 통계적으로 유의한 (+) 영향을 미친다는 사실이 규명되었다. 추정에 따르면 미국 FRB의 정책금리가 10bp상승(하락) 변경될 경우 국내 10년물 국고채 금리는 7bp 상승(하락)하는 것으로 추정된다. 둘째, '08년 글로벌 금융위기 전 후를 나누어 실증 분석해 본 결과, 금융위기 이후 데이터에서는 1%의 유의수준으로 유의한 (+) 영향이 도출되었으나, 금융위기 이전 시기에서는 유의하지 못한 결과가 도출되었다. 셋째, 한 미 양국 간의 국고채 수익률 차이변수를 활용해 실증분석 해본 결과에 따르면 한 미 양국 간 국채수익률 차이는 통계적으로 1%의 유의한 (+) 영향을 받는 것으로 드러났다. 또한 본 연구에서는 Brunner(2000)의 연구에서 보고한 충격반응을 활용해 미국 FRB의 정책금리변수의 조정 영향이 국내 국고채 10년물에 어떠한 영향을 미치는가를 분석했다. 분석결과에 따르면, 미국 FRB의 정책조정변수의 영향력은 국내 10년물 국고채 시장에 12개월 정도 지속되는 것으로 나타났다. The objective of this study is to investigate the effects of FRB's policy rate adjustments on the 10 years Korea Treasury Bond (KTB) market. Our results are summarized as follows. First, it is found that the FRB's policy rate adjustments are statistically significant positive impact on the 10 years KTB yield. Based on projection, the 10bp increases in FRB's policy rate generates 7bp higher in 10 years KTB yield. Second, the result from after the Lehman bankruptcy in '08 is found to be statistically significant, while that of before financial crisis is not. Third, the variable, in which consistent with yield difference between the 10 years UTB(US Treasury Bond) and the 10 years KTB, is found that is statistically significant positive impact in 1% significance level. And also given that Brunner(2000) exhibited that the Federal Fund Rate innovations are found to impact on other economic variables through the impulse response, the 10 years KTB yield is found to respond to innovation in the Federal Fund Rate up to about 12 months.

Identifying the role of consumer and producer price index announcements in stock index futures price changes

Quoted Spreads and Trade Imbalance Dynamics in the European Treasury Bond Market

Long-term stock market volatility and the influence of terrorist attacks in Europe

The Term Structure of Bond Market Liquidity

This research explores into the intricate dynamics and drivers of stock market volatility in both emerging and developed G20 economies. Empirical results from GARCH (1,1) and EGARCH (1,1) indicate the existence of both short-run and long-run symmetric and asymmetric volatility in the market returns of the G20 countries before and during the crisis and also captured the presence of information asymmetry. Argentina and China’s markets experienced the highest symmetric short- and long-run volatility persistency during the pre-pandemic period, whereas the Russian market had the largest symmetric and asymmetric short- and long-run volatility persistency during the COVID-19 crisis among the other G20 countries. Consequently, the findings of this research contributed to the existing body of knowledge on stock market volatility, offering nuanced perspectives on the distinct characteristics and dynamics of emerging and developed economies, and paving the way for more informed decision-making in the global financial landscape.