Macroeconomic annonucements in the Finnish stock market - Are scheduled macroeconomic announcements potential risk factors in the Finnish stock market?

Abstract

This study examines the effects of Eurozone macroeconomic announcements on the Finnish stock market over approximately 20 years of daily return data. Focusing on seven key Eurozone announcements, the analysis explores how unexpected components of these announcements impact both the first and second moments of stock returns around the announcement dates. The findings reveal that when accounting for business cycles, the announcements have a statistically significant impact on stock returns. The impact is particularly significant during periods of economic contraction. Furthermore, the effect on conditional variance is asymmetric, with negative surprises having a more pronounced influence. Surprisingly, this impact on variance tends to manifest the day after the announcement. Finally, the heightened sensitivity observed during contractions may be explained by the more substantial influence some macroeconomic announcements have on growth expectations in downturns compared to expansions. The study identifies announcements on the Consumer Price Index (CPI), Producer Price Index (PPI), Unemployment, Monetary aggregate (M3), and ECB’s governing council decisions on the Main Refinancing Operations rate to potentially serve as risk factors for the Finnish stock market which are consistent with the findings from US stock markets.