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US monetary policy announcements and Irish stock market volatility

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  • Don Bredin
  • Caroline Gavin
  • Gerard O'Reilly

Abstract

The influence of foreign monetary policy decisions on the volatility of the Irish stock market is investigated. Specifically, the influence of US monetary policy announcements on the ISEQ is examined. Evidence of the so-called calm before the storm is found, i.e., there appears to be a decline in volatility on the day prior to an FOMC meeting and a subsequent increase in volatility after the results of the FOMC meeting is made known. Also evidence is found to suggest that ISEQ volatility is influenced by surprise changes in US monetary policy. Moreover, US monetary surprises appear to affect Irish stock return volatility asymmetrically with a surprise tightening of US monetary policy leading to an increase in Irish stock return volatility. This paper represents an important step in addressing the issues of spillover identification between the USA and the Irish stock market.

Suggested Citation

  • Don Bredin & Caroline Gavin & Gerard O'Reilly, 2005. "US monetary policy announcements and Irish stock market volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 15(17), pages 1243-1250.
    • Handle: RePEc:taf:apfiec:v:15:y:2005:i:17:p:1243-1250
    DOI: 10.1080/09603100500390836
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    References listed on IDEAS

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    Cited by:

    1. Kim, Suk-Joong & Nguyen, Do Quoc Tho, 2008. "The reaction of the Australian financial markets to the interest rate news from the Reserve Bank of Australia and the U.S. Fed," Research in International Business and Finance, Elsevier, vol. 22(3), pages 378-395, September.
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    3. Chen, Yu-Lun & Mo, Wan-Shin & Qin, Rong-Ling & Yang, J. Jimmy, 2023. "Return spillover across China's financial markets," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    4. Olga Kuznetsova, 2016. "The Value of Public Information in a Two-Region Model," HSE Working papers WP BRP 126/EC/2016, National Research University Higher School of Economics.
    5. Xinsheng Lu & Francis In, 2006. "Monetary Policy, Open Market Operations and New Zealand Interest-Rate and Exchange-Rate Markets," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 11(4), pages 462-481.
    6. Madhuri Malhotra & M. Thenmozhi & Arun Kumar Gopalaswamy, 2011. "Evidence on Changes in Time Varying Volatility around Bonus and Rights Issue Announcements," Working Papers 2011-061, Madras School of Economics,Chennai,India.
    7. Kim, Suk-Joong & Nguyen, Do Quoc Tho, 2009. "The spillover effects of target interest rate news from the U.S. Fed and the European Central Bank on the Asia-Pacific stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(3), pages 415-431, July.
    8. Tang, Yong & Luo, Yong & Xiong, Jie & Zhao, Fei & Zhang, Yi-Cheng, 2013. "Impact of monetary policy changes on the Chinese monetary and stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4435-4449.
    9. Ruttachai Seelajaroen & Pornanong Budsaratragoon & Boonlert Jitmaneeroj, 2020. "Do monetary policy transparency and central bank communication reduce interest rate disagreement?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(3), pages 368-393, April.
    10. Xinsheng Lu & Ling Qu & Ying Zhou, 2015. "The Impact of Monetary Surprises on Australian Financial Futures Markets: An Insight into Cash Rate Target Announcements," Australian Economic Papers, Wiley Blackwell, vol. 54(3), pages 151-166, September.

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