Volta, Vittoria;
Aste, Tomaso;
(2022)
Causal coupling between European and UK markets triggered by announcements of monetary policy decisions.
Royal Society Open Science
, 9
(3)
, Article 211342. 10.1098/rsos.211342.
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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.
| Type: | Article |
|---|---|
| Title: | Causal coupling between European and UK markets triggered by announcements of monetary policy decisions. |
| Location: | England |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1098/rsos.211342 |
| Publisher version: | https://doi.org/10.1098/rsos.211342 |
| Language: | English |
| Additional information: | © 2022 The Authors. Published by the Royal Society under the terms of the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/, which permits unrestricted use, provided the original author and source are credited. |
| Keywords: | causality, markets, risk spillover, transfer entropy |
| UCL classification: | UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science UCL > Provost and Vice Provost Offices > UCL BEAMS UCL |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10146637 |
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