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http://ssrn.com/abstract=2073184
 
 

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Economic Policy Uncertainty and Stock Market Returns


Vichet Sum


University of Maryland Eastern Shore - School of Business and Technology

June 2, 2012

International Review of Applied Financial Issues and Economics, Forthcoming

Abstract:     
This paper investigates how stock market returns respond to economic policy uncertainty shocks. Based on the vector autoregression (VAR) analysis of the monthly changes in economic policy uncertainty index in the United States and CRSP value-weighted index from 1985:M2 to 2012:M6, the results show that stock returns negatively respond to economic policy uncertainty shocks in the first, fourth, fifth, eighth, night, tenth and eleventh months. In addition, the results from Granger causality Wald tests show that economic policy uncertainty is helping in predicting stock returns. Finally, the results from the time-varying OLS regression also show that changes in economic policy uncertainty index predict negative stock returns.

Number of Pages in PDF File: 8

Keywords: economic policy uncertainty, stock returns, VAR

JEL Classification: E60, G12, G14

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Date posted: June 3, 2012 ; Last revised: September 17, 2013

Suggested Citation

Sum, Vichet, Economic Policy Uncertainty and Stock Market Returns (June 2, 2012). International Review of Applied Financial Issues and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2073184 or http://dx.doi.org/10.2139/ssrn.2073184

Contact Information

Vichet Sum (Contact Author)
University of Maryland Eastern Shore - School of Business and Technology ( email )
2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)
HOME PAGE: http://www.umes.edu/bma/Sum.html
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