Announcement Effects of Macro Economic Variables on Stock Market Returns and Volatility- A Neural Network Approach

Abstract

We study the effects of macroeconomic variables on stock returns and volatility using a Neural Network approach. Neural network models can discover nonlinear complex patterns with the ability to process high levels of data. Neural networks can be used for any type of similar data sets with the ability to process and uncover similar data patterns, and provide a result. In this paper, we use a learning neural network model to find the relationship and strength of six widely used macroeconomic variables on stock market returns and volatility. Results indicate the three most influential variables are announcements of inflation, unemployment, and national income.