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The Effect of Economic Policy Uncertainty in the US on the Stock Market Performance in Canada and Mexico

International Journal of Economics and Finance, 4(11), 165-171

15 Pages Posted: 23 Jun 2012 Last revised: 16 Oct 2012

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: June 22, 2012

Abstract

This paper investigates the effect of economic policy uncertainty in the United States on stock market performance in Canada and Mexico. Using monthly returns of the Canada S&P/TSX-300 Total Return Index from 1985:2 to 2012:5 and Mexico SE Total Return Index from 1988:1 to 2012:5, this study shows that the increased changes in economic policy uncertainty in the US negatively affect stock market performance in Canada and Mexico. Although the changes in the U.S. trade balance do not influence the effect of the changes in economic policy uncertainty in the US on the stock market performance in Canada and Mexico, the returns on the S&P 500 do have an impact on this effect. The findings suggest that stock market performance in Canada and Mexico is linked to the economic policy conditions and stock performance in the US. The implication of this finding is that market participants in Canada and Mexico do pay attention to the economic policy conditions and stock performance in the US.

Keywords: economic policy uncertainty, stock return performance, Canada, Mexico

JEL Classification: E60, G12, G14

Suggested Citation

Sum, Vichet, The Effect of Economic Policy Uncertainty in the US on the Stock Market Performance in Canada and Mexico (June 22, 2012). International Journal of Economics and Finance, 4(11), 165-171. Available at SSRN: https://ssrn.com/abstract=2089544 or http://dx.doi.org/10.2139/ssrn.2089544

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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