Do U.S. Macroeconomic Surprises Influence Equity Returns? An Exploratory Analysis of Developed Economies

30 Pages Posted: 11 May 2013

See all articles by Brian M. Lucey

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Abu Dhabi University - College of Business Administration; Shanghai Lixin Univeristy of Accounting and Finance

Ali Nejadmalayeri

University of Wyoming - College of Business

Manohar Singh

Willamette University - Atkinson Graduate School of Management

Date Written: May 10, 2013

Abstract

Given the dominant role the U.S. economy plays in global trade, we explore how U.S. macroeconomic surprises affect stock markets in ten major developed economies as well as in China and India. We do not find strong enough evidence to conclude that US macro shocks materially and consistently influence equity returns and volatilities in the economies studied. Consistent with previous research, it appears that only in few markets are return levels materially influenced by macro surprises generated in the U.S. Also, only a small number of macro shocks seem to be of any consistent significance. For returns levels, inflation, productivity, consumer confidence, and retail sales seem to matter. At the same time, conditional volatilities appear to be influenced by inflation, retail sales, durable goods, industrial production, consumer confidence, gross domestic product, and trade balance surprises. Finally, our exploratory analysis indicates that the degree of bilateral trade connectedness may partially explain the extent to which macroeconomic surprises are transmitted across countries.

Keywords: Macroeconomic News, International Financial Markets, Stock Returns and Volatility

JEL Classification: F36, F37, G15, G12

Suggested Citation

Lucey, Brian M. and Nejadmalayeri, Ali and Singh, Manohar, Do U.S. Macroeconomic Surprises Influence Equity Returns? An Exploratory Analysis of Developed Economies (May 10, 2013). Available at SSRN: https://ssrn.com/abstract=2263157 or http://dx.doi.org/10.2139/ssrn.2263157

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
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Abu Dhabi University - College of Business Administration ( email )

PO Box 59911
Abu Dhabi, Abu Dhabi 59911
United Arab Emirates

Shanghai Lixin Univeristy of Accounting and Finance ( email )

Shanghai
China

Ali Nejadmalayeri

University of Wyoming - College of Business ( email )

1000 E. University Avenue
Laramie, WY 82071
United States

Manohar Singh

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

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