The effect of macroeconomic announcements at a sectoral level in the US and European Union

This paper examines macroeconomic announcement shocks on United States (US) and European Union (EU) sectoral indices. We first examine unexpected (surprise) macroeconomic announcements and then decompose the surprise announcements further into positive and negative shocks. There are significant differences in announcement effects between the US and the EU markets with US macroeconomic announcements being more influential than EU announcements. Sector returns are more responsive to macroeconomic news shocks when decomposed into positive and negative components, as well as being more consistent with the predicted relationships. There is also some evidence of an asymmetric announcement reaction to positive and negative shocks. As sectors respond differently to the global and regional shocks this implies they are not fully integrated and indicates possible risk diversification.