Impact of US Macroeconomic Surprises on Stock Market Returns in Developed Economies
Brian M. Lucey
Trinity College, Dublin - School of Business; University of Dublin - Institute for International Integration Studies (IIIS); Glasgow Caledonian University - Division of Accounting & Finance
Oklahoma State University, Stillwater - Spears School of Business; Oklahoma State University - Department of Finance
Willamette University - Atkinson Graduate School of Management
Macroeconomic conditions are known to affect risks factors and thereby influence asset returns within a given economy. We explore this link in a global setting. Given the dominant role the U.S. economy plays in the global economic environment, U.S. Macro economic shocks are expected to affect asset returns in other countries. The impact should be more pronounced in the developed economies where the U.S. is a large trading and capital-flows partner. Our results shows that residual returns and conditional volatilities in major developed economies are significantly impacted by US macroeconomic surprises. We identify U.S. macro economic shocks that have spillover impact on global asset returns over and above those transmitted through equity market returns. While return levels are significantly influenced by productivity and retail sales surprises, return conditional volatilities are mainly influenced by inflation, personal income, industrial production, leading indicators, and gross domestic product surprises.
Number of Pages in PDF File: 21
Keywords: Macroeconomic Announcements, forecasts, surprises, USA, Europe
JEL Classification: F40, 315working papers series
Date posted: January 14, 2008
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