Performances of Emerging Stock Exchanges During the Fed’s Tapering Announcements
This paper investigates abnormal returns of 19 emerging market equity portfolios during the Fed’s tapering period. Event study methodology is used during the early Fed’s announcements at 2013. The aim of the study is to evaluate both the event study methodology and abnormal return performance of the emerging market stock exchanges during tapering period. The authors also check for abnormal volatility during tapering announcements, specifying it with GARCH (1,1) model. The results indicate that, together with China and Greece, the fragile five economies are differentiated from the rest of the emerging markets during tapering announcements. Moreover, the striking result that the authors see is Turkey is affected more negatively than any other fragile five members in this period. Yet, the authors did not find any significant abnormal volatility effect brought by tapering announces. In addition, the authors find emerging markets are not semi-strong form efficient during tapering period.
KeywordsEvent study Abnormal return Fed’s tapering Emerging markets
- Aizenman, J., Binici, M., & Hutchison, M. M. (2014). The transmission of Federal Reserve tapering news to emerging financial markets (No. w19980). National Bureau of Economic Research.Google Scholar
- Bank of England. (2016, June 1). Quantitative easing – injecting money into the economy. Retrieved from bankofengland.co.uk.Google Scholar
- Bhattarai, S. C. (2015). Effects of US quantitative easing on emerging market economies. Retrieved from www.dallasfed.org/assets/documents/institute/wpapers/2015/0255.pdf.
- Chen, J. M. (2016, June 1). Spillovers from United States monetary policy on emerging markets: Different this time? Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2561285.
- Díez, F. J. (2014). The emerging market economies in times of taper-talk and actual tapering. Current Policy Perspectives No. 14-6.Google Scholar
- Federal Reserve Bank of San Francisco. (2016, March 15). FRBSF Economic Letter. Retrieved from http://www.frbsf.org/economic-research/publications/economic-letter/2014/march/federal-reserve-tapering-emerging-markets/.
- IMF. (2014). IMF Working Paper No:240.Google Scholar
- Kuepper, J. (2016, March 20). What are the fragile five? Retrieved from https://www.thebalance.com/what-are-the-fragile-five-1978880.
- Lavigne, R. S. (2014). Spillover effects of quantitative easing on emerging-market economies. Bank of Canada Review, 2014, 23–33.Google Scholar
- MacKinlay, A. C. (1997). Event studies in economics and finance. Journal of Economic Literature, 35(1), 13–39.Google Scholar
- Morgan Stanley. (2016, May 20). Fx pulse. Retrieved from http://www.morganstanley.com/institutional/research/pdf/FXPulse_20130829.pdf.
- Rai, V., & Suchanek, L. (2014). The effect of the Federal Reserve’s tapering announcements on emerging markets. Bank of Canada WP.Google Scholar
- Sahay, R., Arora, V., Arvanitis, T., Faruqee, H., N’Diaye, P., & Griffoli, T. M. (2014). Emerging market volatility: Lessons from the taper tantrum. IMF Staff Discussion Notes.Google Scholar