EXPLORING STOCK MARKET REACTION TO EUROPEAN CENTRAL BANK ANNOUNCEMENTS: A CLUSTER ANALYSIS USING UNSUPERVISED MACHINE LEARNING
EXPLORING STOCK MARKET REACTION TO EUROPEAN CENTRAL BANK ANNOUNCEMENTS: A CLUSTER ANALYSIS USING UNSUPERVISED MACHINE LEARNING

Author(s): Dragomir Genov, Penyo Georgiev, Kiril Desev
Subject(s): Economy, National Economy, Financial Markets
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: stock market; market returns; market volatility; cluster analysis; machine learning; k-means
Summary/Abstract: Central bank intervention is a vital aspect of economic regulation that significantly impacts stock market dynamics. This study examines short-term price reactions, volatility, and returns by analyzing daily price data for stock market indexes across 30 European countries. Our results reveal that average returns are considerably lower around and after days when the European Central Bank (ECB) announces changes in monetary policy through interest rate hikes. Employing the k-means method and market data for average returns and volatility, we conduct cluster analysis, revealing variations in the number of clusters and countries when using data for a 3-year period versus data only for days when the ECB announcements occurred.

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