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The Reaction of Stock Markets in the BRIC Countries to Economic Policy Uncertainty in the United States

15 Pages Posted: 27 Jun 2012 Last revised: 29 Dec 2014

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: June 27, 2012

Abstract

This study examines if economic policy uncertainty in the U.S. has any effect on the returns on stock markets in the BRIC (Brazil, Russia, India and China) countries. The current study also investigates how stock market returns in the four countries respond to the U.S. economic policy uncertainty shock. The Granger causality tests are also performed to determine if economic policy uncertainty cause the returns on the four stock markets. The results show that the U.S. economic policy uncertainty negatively affect stock market returns in Brazil, India and Russia; this negative effect is statistically significant at the 10% level for Brazil and at the 1% level for India and Russia. Stock returns in China are also negatively affected by the U.S. economic policy uncertainty; however, this effect is not statistically significant. The negative effect of economic policy uncertainty on stock market returns becomes statistically insignificant for Brazil and India controlling for the S&P 500 returns; the coefficient for Russia is still statistically significant but at the 10% level.

Keywords: economic policy uncertainty, stock market performance, USA, BRIC

JEL Classification: E60, G12, G14

Suggested Citation

Sum, Vichet, The Reaction of Stock Markets in the BRIC Countries to Economic Policy Uncertainty in the United States (June 27, 2012). Available at SSRN: https://ssrn.com/abstract=2094697 or http://dx.doi.org/10.2139/ssrn.2094697

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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