Causal coupling between European and UK markets triggered by announcements of monetary policy decisions-Reference-Cited by-同舟云学术

Causal coupling between European and UK markets triggered by announcements of monetary policy decisions

Published:2022-03 Issue:3 Volume:9 Page:
ISSN:2054-5703
Container-title:Royal Society Open Science
language:en
Short-container-title:R. Soc. open sci.

Author:

Volta Vittoria¹,Aste Tomaso¹²³^ORCID

Affiliation:

1. Department of Computer Science, University College London, Gower Street, London, UK

2. UCL Centre for Blockchain Technologies, UCL, London, UK

3. Systemic Risk Centre, London School of Economics and Political Sciences, London, UK

Abstract

We investigate high-frequency reactions in the Eurozone stock market and the UK stock market during the time period surrounding European Central Bank (ECB) and the Bank of England (BoE)’s interest rate decisions, assessing how these two markets react and co-move influencing each other. The effects are quantified by measuring linear and nonlinear transfer entropy combined with a bivariate empirical mode decomposition from a dataset of 1 min prices for the Euro Stoxx 50 and the FTSE 100 stock indices. We uncover that central banks’ interest rate decisions induce an upsurge in intraday volatility that is more pronounced on ECB announcement days and there is a significant information flow between the markets with prevalent direction going from the market where the announcement is made towards the other.

Funder

Engineering and Physical Sciences Research Council

Economic and Social Research Council

Publisher

The Royal Society

Subject

Multidisciplinary

Link

https://royalsocietypublishing.org/doi/pdf/10.1098/rsos.211342

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