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The effect of US macroeconomic news announcements on the Canadian stock market: Evidence using high-frequency data

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  • Hussain, Syed Mujahid
  • Ben Omrane, Walid

Abstract

We analyze the impact of US macroeconomic news announcements on the Canadian benchmark stock index return and volatility using high-frequency 5-min data. Our findings reveal that several US news releases exert a statistically significant influence on the Canadian stock market return and volatility. Moreover, we show that during the 2008 US recession, slightly more US news announcements exhibit significant impacts on the Canadian equity returns, with relatively pronounced effects. Overall, our results support previous findings by suggesting that US macroeconomic fundamentals form a linkage between Canadian and US financial markets.

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  • Hussain, Syed Mujahid & Ben Omrane, Walid, 2021. "The effect of US macroeconomic news announcements on the Canadian stock market: Evidence using high-frequency data," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319301485
    DOI: 10.1016/j.frl.2020.101450
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    References listed on IDEAS

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    1. Bernd Hayo & Matthias Neuenkirch, 2012. "Domestic Or U.S. News: What Drives Canadian Financial Markets?," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 690-706, July.
    2. Jonathan Kearns & Phil Manners, 2006. "The Impact of Monetary Policy on the Exchange Rate: A Study Using Intraday Data," International Journal of Central Banking, International Journal of Central Banking, vol. 2(4), December.
    3. Kari Harju & Syed Mujahid Hussain, 2011. "Intraday Seasonalities and Macroeconomic News Announcements," European Financial Management, European Financial Management Association, vol. 17(2), pages 367-390, March.
    4. Singh, Manohar & Nejadmalayeri, Ali & Lucey, Brian, 2013. "Do U.S. macroeconomic surprises influence equity returns? An exploratory analysis of developed economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 476-485.
    5. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2003. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," American Economic Review, American Economic Association, vol. 93(1), pages 38-62, March.
    6. Toni Gravelle & Richhild Moessner, 2001. "Reactions of Canadian Interest Rates to Macroeconomic Announcements: Implications for Monetary Policy Transparency," Staff Working Papers 01-5, Bank of Canada.
    7. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(4), pages 523-543, December.
    8. Ben Omrane, Walid & Savaşer, Tanseli, 2016. "The sign switch effect of macroeconomic news in foreign exchange markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 96-114.
    9. Hussain, Syed Mujahid, 2011. "Simultaneous monetary policy announcements and international stock markets response: An intraday analysis," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 752-764, March.
    10. Ben Omrane, Walid & Savaşer, Tanseli, 2017. "Exchange rate volatility response to macroeconomic news during the global financial crisis," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 130-143.
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    Cited by:

    1. Faik Bilgili & Emrah Koçak & Sevda Kuşkaya, 2023. "Dynamics and Co-movements Between the COVID-19 Outbreak and the Stock Market in Latin American Countries: An Evaluation Based on the Wavelet-Partial Wavelet Coherence Model," Evaluation Review, , vol. 47(4), pages 630-652, August.
    2. Muhammad Ateeq ur REHMAN & Furman ALI & Shang XIE, 2022. "Impact of Foreign Investment News on the Return, Cost of Equity and Cash Flow Activities," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 112-127, December.
    3. Salisu, Afees A. & Gupta, Rangan & Pierdzioch, Christian, 2022. "Predictability of tail risks of Canada and the U.S. Over a Century: The role of spillovers and oil tail Risks☆," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    4. Yiqi Deng & Siu Ming Yiu, 2022. "Deep Multiple Instance Learning For Forecasting Stock Trends Using Financial News," Papers 2206.14452, arXiv.org.
    5. Naeem, Muhammad Abubakr & Chatziantoniou, Ioannis & Gabauer, David & Karim, Sitara, 2024. "Measuring the G20 stock market return transmission mechanism: Evidence from the R2 connectedness approach," International Review of Financial Analysis, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    Intraday volatility; macroeconomic news announcements; financial crisis; High-frequency data;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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