The impact of United States macroeconomic news announcements on the Johannesburg Stock Exchange

Abstract

Orientation: Macroeconomic news announcement poses a risk to stock returns, especially that of United States (US) on emerging markets because of globalisation.

Research purpose: The purpose was to investigate the impact that US macroeconomic news announcements have on the Johannesburg Stock Exchange (JSE).

Motivation for the study: Investment in financial markets is volatile. Globalisation means that greater economies’ macroeconomic news announcements could impact emerging financial markets. Knowing which announcements have an influence could improve investment decisions.

Research design, approach and method: This study is qualitative, following secondary data analysis. Analysis was carried out using volatility modelling, paired with an event study to add robustness.

Main findings: The generalised autoregressive conditional heteroskedastic (GARCH) models indicated that US macroeconomic news announcements made in relation to unemployment were statistically significant, with a negative impact on the JSE. This was supplemented by the event study in which interest rate announcements that were made in August 2008 (during the global financial crisis) were found to have a statistically significant impact on the JSE. The coronavirus disease 2019 (COVID-19) pandemic did not appear to have a statistically significant impact in the results obtained from the event study.

Practical/managerial implications: Investment industry professionals and policymakers should consider unemployment announcements from the US to enhance investment decisions while managing stock market volatility.

Contribution/value-add: The results make a novel contribution towards the findings during the initial COVID-19 period and generalisability of the method as well as the theoretical expansion of the theoretical application of globalisation on stock markets.