The Reaction of Stock Market Indicies to Macroeconomic News - the Evidence from Intraday Data

Abstract

Studies show that in the dynamics of intraday returns from financial instruments the publication of macroeconomic data is oft en taken into account and treated as fundamental information. In this study we examine the reaction to American macroeconomic news announcements in the returns from the stock indices of three European stock markets. Intraday data were used to study reactions aft er a 5-minute interval, with the majority of announcements resulting in a statistically significant movement in price. We also compared the reaction to good and bad news and found that the response was diff erent and consistent with expectations. The reaction was similar across the stock market indices used in the study. Th ere is a prevailing asymmetry in the reaction to good and bad news in the stock market indices.