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Macroeconomic shocks and stock market returns

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  • Seungho Baek
  • Mina Glambosky
  • Sunil Mohanty

Abstract

We examine how structural macroeconomic disturbances impact US stock market returns. Our analysis uncovers a significant negative correlation between stock market returns and both systematic and monetary shocks. Our findings indicate that monetary policy shocks exert a substantial influence on US stock market returns. Forecast error variance decomposition of stock market returns shows systematic and monetary shocks explain 95% of stock return variance. An examination of industry-level stock returns indicates industries engaged in essential goods have greater resilience to shocks, indicating a reduced sensitivity to market fluctuations.

Suggested Citation

  • Seungho Baek & Mina Glambosky & Sunil Mohanty, 2025. "Macroeconomic shocks and stock market returns," Applied Economics Letters, Taylor & Francis Journals, vol. 32(11), pages 1601-1607, June.
    • Handle: RePEc:taf:apeclt:v:32:y:2025:i:11:p:1601-1607
    DOI: 10.1080/13504851.2024.2308585
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