Price jumps in developed stock markets: the role of monetary policy committee meetings

In this paper, we analyze the degree of occasional large price changes and extreme volatility – known as jump intensity – in the Euro area, Japan, the UK and the US. We also measure the reaction of jump intensity in these markets to the US Federal Reserve meetings as well as of the country’s own monetary policy meetings. The results indicate that the conditional jump intensity in all the markets follows a highly persistent process. Evidence suggests that the US monetary policy positively impacts the jump intensity in the case of the UK, Euro, and the US, including in the sub-sample periods found by the structural break test. Moreover, in assessing the joint effects, we find that the US continues to maintain the central role in driving the jump intensities, with it having even a greater role than monetary policy of the country itself.