Real aggregate activity and stock returns

Ding Du, Karen Denning, Xiaobing Zhao

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


The notion that real aggregate activity exerts important influence on stock returns has strong theoretical appeal but weak empirical support. We argue in this paper that the lack of empirical reaction to macro news might be at least partly due to the usual focus on macro variables, which are noisy measures of real aggregate activity or the common factor. To test our conjecture, we focus on the Chicago Fed National Activity Index (CFNAI-MA3), a single summary measure of the common factor in 85 macro variables. Our main finding is that the news component of this index does affect stock returns. The effects show up at the market level as well as at the portfolio level. The effects are not only statistically but also economically significant.

Original languageEnglish (US)
Pages (from-to)323-337
Number of pages15
JournalJournal of Economics and Business
Issue number5
StatePublished - Sep 2012


  • Chicago Fed National Activity Index
  • Real aggregate activity
  • Stock returns

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics


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