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Government policy uncertainty and stock prices: The case of Australia's uranium industry

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  • Ferguson, Andrew
  • Lam, Peter

Abstract

We investigate effects of government policy uncertainty on stock prices, reflecting tension between ‘private interest’ (economic benefits) and ‘public interest’ arguments over uranium mining. Using a sample of Australian-listed uranium firms from January 2005 through June 2008, we document a positive contemporaneous correlation between stock returns and volatility and two measures of government policy uncertainty, proxied by the spread in voters' opinion polls between the two major political parties and a news-based sentiment index. Event-study results show significant stock price reactions to key uranium-related policy events, with cross-sectional variation in event returns predicted by models incorporating firm- and project-level characteristics. Our research design and findings may inform future research on the capital market effects of government policy uncertainty in other regulated industries.

Suggested Citation

  • Ferguson, Andrew & Lam, Peter, 2016. "Government policy uncertainty and stock prices: The case of Australia's uranium industry," Energy Economics, Elsevier, vol. 60(C), pages 97-111.
    • Handle: RePEc:eee:eneeco:v:60:y:2016:i:c:p:97-111
    DOI: 10.1016/j.eneco.2016.08.026
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    Cited by:

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    3. He, Feng & Ma, Yaming & Zhang, Xiaojie, 2020. "How does economic policy uncertainty affect corporate Innovation?–Evidence from China listed companies," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 225-239.
    4. Ahmed, Walid M.A., 2021. "Stock market reactions to upside and downside volatility of Bitcoin: A quantile analysis," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    5. Ozili, Peterson K, 2022. "Economic policy uncertainty, bank nonperforming loans and loan loss provisions: are they correlated?," MPRA Paper 112381, University Library of Munich, Germany.
    6. Yajie Qi & Huajiao Li & Sui Guo & Sida Feng, 2019. "Dynamic Transmission of Correlation between Investor Attention and Stock Price: Evidence from China’s Energy Industry Typical Stocks," Complexity, Hindawi, vol. 2019, pages 1-15, December.
    7. Marian Sofranko & Samer Khouri & Olga Vegsoova & Peter Kacmary & Tawfik Mudarri & Martin Koncek & Maxim Tyulenev & Zuzana Simkova, 2020. "Possibilities of Uranium Deposit Kuriskova Mining and Its Influence on the Energy Potential of Slovakia from Own Resources," Energies, MDPI, vol. 13(16), pages 1-21, August.

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    More about this item

    Keywords

    Uranium; Government policy uncertainty; Event study; Stock prices; Opinion polls; Sentiment;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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