Effects of Economic Policy Uncertainty Shocks on the Long-Run US-UK Stock Market Correlation

11 Pages Posted: 4 Oct 2016 Last revised: 12 Jan 2018

See all articles by Hossein Asgharian

Hossein Asgharian

Lund University - Department of Economics; Knut Wicksell Centre for Financial Studies

Charlotte Christiansen

Aarhus University - CREATES

Rangan Gupta

University of Pretoria - Department of Economics

Ai Jun Hou

Stockholm University

Date Written: October 3, 2016

Abstract

We use the economic policy uncertainty indices of Baker, Bloom, and Davis (2016) in combination with the mixed data sampling (MIDAS) approach to investigate the US and UK stock market movements. The long-run US-UK stock market correlation depends positively on US economic policy uncertainty shocks. The US long-run stock market volatility depends significantly on the US economic policy uncertainty shocks but not on UK shocks while the UK depends significantly on both.

Keywords: economic policy uncertainty index; mixed data sampling; stock market correlation; stock market volatility

JEL Classification: G11, G15, G30, C32

Suggested Citation

Asgharian, Hossein and Christiansen, Charlotte and Gupta, Rangan and Hou, Ai Jun, Effects of Economic Policy Uncertainty Shocks on the Long-Run US-UK Stock Market Correlation (October 3, 2016). Available at SSRN: https://ssrn.com/abstract=2846925 or http://dx.doi.org/10.2139/ssrn.2846925

Hossein Asgharian

Lund University - Department of Economics; Knut Wicksell Centre for Financial Studies ( email )

P.O. Box 7082
S-220 07 Lund
Sweden
046-222-86-87 (Phone)

Charlotte Christiansen (Contact Author)

Aarhus University - CREATES ( email )

Fuglesangs Alle 4
Aarhus V, DK 8210
Denmark

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Ai Jun Hou

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

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