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Financial crises, price discovery, and information transmission: a high-frequency perspective

Author

Listed:
  • Roland Füss

    (University of St. Gallen
    Centre for European Economic Research (ZEW)
    NTNU Business School)

  • Ferdinand Mager

    (EBS Universität für Wirtschaft und Recht)

  • Michael Stein

    (University of Duisburg-Essen
    IQ-KAP (The Private Institute for Quantitative Capital Market Research at the DekaBank) and Deka Investment GmbH)

  • Lu Zhao

    (Southwestern University of Finance and Economics
    Stockholm University)

Abstract

This paper examines the price discovery processes before and during the 2007–2009 subprime and financial crisis, as well as the subsequent European sovereign crisis, for American and German stock and bond markets, as well as for U.S. Dollar/Euro FX. Based on 5-s intervals, we analyze how asset prices interact conditional on macroeconomic announcements from the USA and Germany. Our results show significant co-movement and spillover effects in returns and volatility, reflecting systematic information transmission mechanisms among asset markets. We document strong state dependence with a substantial increase in inter-asset spillovers and feedback effects during times of crisis.

Suggested Citation

  • Roland Füss & Ferdinand Mager & Michael Stein & Lu Zhao, 2018. "Financial crises, price discovery, and information transmission: a high-frequency perspective," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 32(4), pages 333-365, November.
    • Handle: RePEc:kap:fmktpm:v:32:y:2018:i:4:d:10.1007_s11408-018-0318-3
    DOI: 10.1007/s11408-018-0318-3
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    More about this item

    Keywords

    Financial crises; Macroeconomic announcements; Price discovery process; Information transmission process; High-frequency data;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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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