The effects of macroeconomic shocks on sector-specific returns

Bradley T. Ewing, Shawn M. Forbes, James E. Payne

Research output: Contribution to journalArticlepeer-review

49 Scopus citations

Abstract

The reliance on market and sector-specific indexes to evaluate managed portfolios and the popularity of index investing has increased the importance of understanding what leads to market movements, how long they may last, and how different sectors respond to macroeconomic shocks. This research is concerned with how shocks to macroeconomic variables affect five major S&P sector-specific stock market indexes. The paper employs the newly developed econometric technique of generalized impulse response analysis. The results identify the various responses of the sectors to unanticipated changes in some key macroeconomic variables. Asset prices are commonly believed to react sensitively to economic news. Daily experience seems to support the view that individual asset prices are influenced by a wide variety of unanticipated events and that some events have a more pervasive effect on asset prices than do others. (Chen et al. 1986, p. 386).

Original languageEnglish
Pages (from-to)201-207
Number of pages7
JournalApplied Economics
Volume35
Issue number2
DOIs
StatePublished - Jan 20 2003

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