Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/258752
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 1 [Article No.:] 28 [Publisher:] MDPI [Place:] Basel [Year:] 2022 [Pages:] 1-24
Publisher: 
MDPI, Basel
Abstract: 
This paper examines the impact of changes in economic policy uncertainty (EPU) and COVID-19 shock on stock returns. Tests of 16 global stock market indices, using monthly data from January 1990 to August 2021, suggest a negative relation between the stock return and a country's EPU. Evidence suggests that a rise in the U.S. EPU causes not only a decline in a country's stock return, but also a negative spillover effect on the global market; however, we cannot find a comparable negative effect from global EPU to U.S. stocks. Evidence suggests that the COVID-19 pandemic has a negative impact that significantly affects stock return worldwide. This study also finds an indirect COVID-19 impact that runs through a change in domestic EPU and, in turn, affects stock return. Evidence shows significant COVID-19 effects that change relative stock returns between the U.S. and global markets, creating a decoupling phenomenon.
Subjects: 
economic policy uncertainty
COVID-19
equity market volatility
GARCH model
global market
uncertainty premium
JEL: 
G11
G12
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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