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
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Uncertainty about Government Policy and Stock Prices
By Lubos Pastor and Pietro Veronesi
-
Uncertainty About Government Policy and Stock Prices
By Lubos Pastor and Pietro Veronesi
-
Uncertainty About Government Policy and Stock Prices
By Lubos Pastor and Pietro Veronesi
-
Uncertainty About Government Policy and Stock Prices
By Lubos Pastor and Pietro Veronesi
-
Investment with Uncertain Tax Policy: Does Random Tax Policy Discourage Investment?
-
Measuring Economic Policy Uncertainty
By Scott R. Baker, Nicholas Bloom, ...
-
Political Uncertainty and Corporate Investment Cycles
By Brandon Julio and Youngsuk Yook