Impact of US Macroeconomic Surprises on Stock Market Returns in Developed Economies

Brian Lucey, Ali Nejadmalayeri and Manohar Singh
Authors registered in the RePEc Author Service: Brian M. Lucey and Ali Nejadmalayeri ()

The Institute for International Integration Studies Discussion Paper Series from IIIS

Abstract: 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.

Date: 2008-01-18
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-rmg
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