Abstract:
This paper presents a comprehensive analysis of the relationship between the US Flash Manufacturing PMI news releases, returns, and volatilities of Russell 1000 and 2000 indexes. Using an autoregressive (AR) and generalized autoregressive conditional heteroskedasticity (GARCH) model, the study examines data from January 2015 to November 2022, encompassing both pre-pandemic, pandemic, and post-pandemic periods. The statistical analysis indicates that these news releases do not significantly influence stock returns, supporting the efficient market hypothesis. Various factors, including measurement errors and the unique circumstances of the Covid-19 pandemic, likely overshadowed the impact of PMI news releases. Additionally, the analysis finds no significant evidence to support the hypothesis that PMI news releases have an amplified impact on stock market volatilities during the pandemic compared to other periods. The study suggests considering other economic indicators, applying advanced time-series analysis techniques, conducting sector-specific analysis, exploring different stock markets, and extending the analysis over longer periods for a more comprehensive understanding. This research contributes to the understanding of the complex dynamics between economic indicators and stock market performance.
