Market reaction as an impact of announcement increase fed interest rate in Asian and European area

Ni Made Indah Mentari; Luh Gede Sri Artini

doi:10.21744/irjmis.v6n5.728

Authors

Ni Made Indah Mentari
indahmentari08@gmail.com
Udayana University, Denpasar, Indonesia
Luh Gede Sri Artini Udayana University, Denpasar, Indonesia

Keywords:

abnormal, efficiency, event study, market, return

Abstract

The purpose of this study is to determine whether there is a difference in the average abnormal return around the date of the announcement of the Fed's interest rate hike in Asia and the European region. The sample of this study was 18 emerging market countries' index indices in Asia and Europe with sample collection techniques using purposive sampling. This study uses One Way Anova analysis techniques and One Sample T-test. The results found that there was no difference in the average abnormal return before and after the announcement of the Fed's interest rate increase. This condition shows that markets in the two regions do not react significantly because markets in Asia and the European region are in an efficient condition in the form of half strong, where the market absorbs information quickly and is reflected in stock prices so there is no difference in the average abnormal return in both regions. The absence of a difference in the average abnormal return is also caused by the uncertainty of the global economy making investors more careful in making investment decisions.

Downloads

Download data is not yet available.

References

Abdioğlu, N., & Aytekin, S. (2016). The Role of Monetary Policy Announcements on Turkish Banks' Stock Returns. EMAJ: Emerging Markets Journal, 6(1), 63-69.

Aggarwal, R. (2017). Different avenues of capital market (secondary market) available for investing in market of yamuna nagar. International Research Journal of Management, IT and Social Sciences, 4(3), 34-50.

Basak, A., & Khanna, K. (2017). A study on the selection criteria of different hotels of Delhi NCR in accordance to the hr policies and market trends. International Journal of Social Sciences and Humanities, 1(1), 27-38. https://doi.org/10.29332/ijssh.v1n1.13

Caporale, G. M., Plastun, O., & Makarenko, I. (2019). Force majeure events and stock market reactions in Ukraine. Brunel University London, Economics and Finance Working Paper Series, (19-05). https://dx.doi.org/10.2139/ssrn.3362155

Chen, M. H. (2012). The reaction of US hospitality stock prices to Fed policy announcements. International Journal of Hospitality Management, 31(2), 395-398. https://doi.org/10.1016/j.ijhm.2011.06.014

Erer, E., & Erer, D. (2017). Long memory in turkish stock market and effects of central banks'announcements. Financial Studies, 21(3).

Fausch, J., & Sigonius, M. (2018). The impact of ECB monetary policy surprises on the German stock market. Journal of Macroeconomics, 55, 46-63. https://doi.org/10.1016/j.jmacro.2017.09.001

Ferguson, A., & Lam, P. (2016). Government policy uncertainty and stock prices: The case of Australia's uranium industry. Energy Economics, 60, 97-111. https://doi.org/10.1016/j.eneco.2016.08.026

Grace, M. F., Rauch, J., & Wende, S. (2017). The effect of monetary policy announcements and government interventions on the US insurance industry during the 2007-2009 crisis. The Journal of Risk Finance, 18(5), 500-522. https://doi.org/10.1108/JRF-02-2017-0039

Gurgul, H., & Wójtowicz, T. (2014). The impact of US macroeconomic news on the Polish stock market. Central European Journal of Operations Research, 22(4), 795-817. https://doi.org/10.1007/s10100-014-0343-x

Habib, Y., Nazir, M., Hashmi, S. H., & Saeed, M. B. (2016). Credit rating announcements and stock returns: Evidence from the banking sector of Pakistan. Available at SSRN 2742879. https://dx.doi.org/10.2139/ssrn.2742879

Hu, H. (2017). The impact of sovereign rating events on bank stock returns: An empirical analysis for the Eurozone. The Journal of Risk Finance, 18(4), 338-367. https://doi.org/10.1108/JRF-12-2016-0156

Jogiyanto, H. (2017). Teori Portofolio dan Analisis Investasi, Edisi 11. Jogjakarta: BPFE-YOGYAKARTA.

Jones, C. P. (2014). Invesment (Principles and Concepts). Twelfth Edition. John Wiley & Sons Singapore Pte.Ltd.

Kusuma, P. S. A. J., & Yasa, G. W. (2019). Comparative analysis of company market reactions on right issue for pay debt and investment. International Research Journal of Management, IT and Social Sciences, 6(3), 29-36. https://doi.org/10.21744/irjmis.v6n3.626

Pratiwi, K.R.D.I & Wirakusuma, I.G.M. (2018). Reaksi Pasar Modal Indonesia Atas Pengumuman Kenaikan Tingkat Suku Bunga Acuan Oleh Fed di AS. E-Jurnal Akuntansi Universitas Udayana, 25 (3), pp: 1966- 1993

Tandelilin, E. (2010). Portofolio dan Investasi, Edisi Pertama. Yogyakarta: Kanisius, 1(1).

Tsai, B. H., & Chen, P. J. (2018). Market Reactions to Oil Price Changes in the Taiwan’s Transportation Industry. International Journal of Business and Information.

Vithessonthi, C., & Techarongrojwong, Y. (2013). Do monetary policy announcements affect stock prices in emerging market countries? The case of Thailand. Journal of Multinational Financial Management, 23(5), 446-469. https://doi.org/10.1016/j.mulfin.2013.10.001

Wang, J., & Zhu, X. (2013). The reaction of international stock markets to Federal Reserve policy. Financial Markets and Portfolio Management, 27(1), 1-30. https://doi.org/10.1007/s11408-012-0204-3

Wardhani, L. S. (2012). Reaksi Pasar Modal Indonesia Terhadap Peristiwa Pemilihan Gubernur DKI Jakarta Putaran II 2012. Jurnal ilmiah mahasiswa Fakultas Ekonomi dan Bisnis Universitas Brawijaya, 1(1).

Young, M., & Bacon, F. (2012). The federal open market committee and the federal funds rate: A test of market efficiency. Academy of Banking Studies Journal, 11(2), 81.