Influence of Monetary Policy Announcements on Ukraine’s Stock Market Return and Volatility

• Main Authors: Pavlov Roman A., Levkovich Oksana V.
• Format: Article
• Language: English
• Published: PH "INZHEK" 2016-08-01
• Series: Problemi Ekonomiki
• Subjects: stock market; monetary policy announcements; stock market return; volatility
• Online Access: http://www.problecon.com/export_pdf/problems-of-economy-2016-3_0-pages-274_280.pdf

The aim of the article is to assess the influence of decisions on the monetary policy on return and volatility of the Ukrainian stock market (on the basis of the representative stock index PFTS) with consideration to the phase of the financial cycle. Daily opening prices for the period of 2000-2015 are used as the initial data, on the basis of which the return of the stock index in the trading day format is calculated. Using the news about the monetary policy, the «expected» component and the component of «unexpectedness» of the announcement information context are distinguished. The analysis of the reaction of the Ukrainian stock market to the macroeconomic news about the monetary policy of the Federal Reserve System and the European Central Bank with regard to the phases of upturns and downturns of the financial cycle has been carried out. The study allows to draw conclusions about the impact of announcements about the dealing rate on the return and volatility of the domestic stock market: first, in the Ukrainian stock market the return reacts much more strongly to the announcements of the Federal Reserve System than those of the European Central Bank; second, the impact of decisions of the Federal Reserve System, being in line with the logic of risk management, is more pronounced during the downturn phase of the financial cycle.