Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets
IMF Working Papers, July 1, 2009
Source details
- Canonical URL
- Macroeconomic Fundamentals, Price Discovery and Volatility Dynamics in Emerging Markets
Other formats
Bibliographic details
- Published: July 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451872941.001
Summary
- This study characterizes volatility dynamics in external emerging bond markets and examines how prices and volatility respond to news about macroeconomic fundamentals.
- Macroeconomic surprises in external emerging bond markets affect both conditional returns and volatility.
- The effects on volatility are more pronounced and longer lasting than those on prices.
- The process of information absorption in external emerging bond markets is more drawn out than in mature bond markets.
- International and regional macroeconomic news is at least as important as local news for both asset valuations and volatility dynamics in external emerging bond markets.
Key findings and analysis
- Volatility dynamics in external emerging bond markets mirror mature bond markets in that macroeconomic surprises affect both returns and volatility.
- The impact on volatility:
- Is more pronounced than the impact on prices.
- Lasts longer than the impact on prices.
- Information absorption:
- Occurs more slowly in external emerging bond markets compared with mature bond markets.
- News importance:
- International and regional macroeconomic news matters at least as much as local news for asset valuation and volatility dynamics in these markets.
Subject areas and keywords
- Subject:
- Bonds
- Consumer price indexes
- Emerging and frontier financial markets
- Financial crises
- Financial institutions
- Financial markets
- Prices
- Securities markets
- Keywords:
- announcements
- asset class
- bond pricing
- Bonds
- Consumer price indexes
- Emerging and frontier financial markets
- emerging market
- emerging markets
- Global
- high-frequency data
- interest rate
- macroeconomic news
- market expectation
- market microstructure literature
- market reaction
- mature market
- news spillovers
- Securities markets
- survey data
- treasury note
- WP