The impact of NBP’s interest rate changes on the changes and volatility of WIG20 Cover Image

Wpływ zmian stopy referencyjnej NBP na zmiany wartości i zmienność indeksu WIG20
The impact of NBP’s interest rate changes on the changes and volatility of WIG20

Author(s): Kamil Saba, Janusz Kudła
Subject(s): Economy, Financial Markets
Published by: Uniwersytet Warszawski - Wydział Nauk Ekonomicznych
Keywords: reference interest rate; stock market volatility; WIG20

Summary/Abstract: The changes of interbank interest rate triggered by National Bank of Poland can impact the prices and the volatility of WIG20 index on the Warsaw Stock Exchange. Therefore, the main hypothesis of the paper stipulates the significant effect of unexpected NBP reference interest rate changes on the changes and volatility of WIG20 – the index of the largest and the most liquid stocks of the Polish capital market. To testify the hypothesis, we split the changes of interest rates, occurring after the decisions of the Monetary Policy Council, on the expected and unexpected components. Subsequently, using the GARCH-type models we estimate the parameters describing the direction and strength of the impact of these components on the changes of WIG20 and its volatility. The analysis confirmed the impact of unexpected interest rate changes but not the expected ones. However, at the same time there is no evidence that stronger unexpected changes or changes headed in particular direction (positive or negative) have a significant impact on the value of the stocks on the Warsaw Stock Exchange.

  • Issue Year: 2014
  • Issue No: 37
  • Page Range: 105-126
  • Page Count: 22
  • Language: Polish