The Impact of Uncertainty in Macroeconomic Variables on Stock Returns in the USA

Leonardo Iania, Robbe Collage and Michiel Vereycken ()
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Robbe Collage: Faculty of Economics and Business, KU Leuven, Naamsestraat 69, 3000 Leuven, Belgium
Michiel Vereycken: Faculty of Economics and Business, KU Leuven, Naamsestraat 69, 3000 Leuven, Belgium

JRFM, 2023, vol. 16, issue 3, 1-15

Abstract: In this research paper, the impact of macroeconomic uncertainty on stock returns in the United States of America is examined. To measure this macroeconomic uncertainty, a survey of Consensus Economics with data ranging from 1989 until 2019 was employed. The survey consists of monthly forecasts for several macroeconomic variables for multiple countries. Four uncertainty measures were developed, based on the standard deviation, interquartile range, high-minus-low and an AR- and GARCH model. By performing linear regressions, a positive relationship between macroeconomic uncertainty and stock returns was identified for, on average, 13 out of 49 sectors, which is consistent with economic theory. Furthermore, the standard deviation of stock returns was regressed on macroeconomic uncertainty. A positive relationship was found for, on average, 41.7 out of 49 sectors. The results are discussed at a general level, at the level of the macroeconomic variables and at the sector level.

Keywords: stock returns; uncertainty; risk factors; surveys (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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