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Stock Market Response to Unexpected Macroeconomic News: The Australian Evidence

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  • Mahdi Sadeghi

Abstract

This paper provides empirical evidence on the relationship between unexpected changes in macroeconomic variables and Australian stock returns over the period 1980-1991. The results suggest that stock returns are positively correlated with any surprise news in the current account deficit, the exchange rate and growth rate of real GDP, and negatively correlated with surprise news about the inflation rate and interest rates. Stock returns are also positively correlated with the unexpected unemployment rate and negatively correlated to revisions in the expected unemployment rate. The results furthermore suggest that market portfolios can detect the impact of common economic shocks better than the portfolios of the two main subsectors of the market.

Suggested Citation

  • Mahdi Sadeghi, 1992. "Stock Market Response to Unexpected Macroeconomic News: The Australian Evidence," IMF Working Papers 1992/061, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1992/061
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    References listed on IDEAS

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    Cited by:

    1. Nieh, Chien-Chung & Lee, Cheng-Few, 2001. "Dynamic relationship between stock prices and exchange rates for G-7 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(4), pages 477-490.
    2. repec:zbw:bofrdp:1995_034 is not listed on IDEAS
    3. Richard Podpiera, 2000. "Efficiency of Financial Markets in Transition: The Case of Macroeconomic Releases," CERGE-EI Working Papers wp156, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Sierimo, Carolina & Virén, Matti, 1995. "Financial factors and the macroeconomy," Bank of Finland Research Discussion Papers 34/1995, Bank of Finland.
    5. M. D. Mckenzie & R. D. Brooks, 2003. "The role of information in Hong Kong individual stock futures trading," Applied Financial Economics, Taylor & Francis Journals, vol. 13(2), pages 123-131.
    6. Asmat Ullah & Syed Waqar Hussain & Zahoor Khan & Muhammad Rafiq, 2011. "Shocks in Macroeconomic Variables and Stock Market Stability: Case Study of KSE-100 Index," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 3(2), pages 154-163, October.
    7. Sierimo, Carolina & Virén, Matti, 1995. "Financial factors and the macroeconomy," Research Discussion Papers 34/1995, Bank of Finland.

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