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How EPU drives long-term industry beta

Author

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  • Yu, Honghai
  • Fang, Libing
  • Du, Donglei
  • Yan, Panpan

Abstract

Based on the DCC-MIDAS framework, we estimate the long-term beta of 10 industries driven by Economic Policy Uncertainty (EPU) in the US. The results demonstrate that EPU significantly drives industry beta. The driving effects on different industries are further analyzed along with the related stock market turmoil. The effects of 10 categories of specific EPU on industries’ beta are also presented. The findings help to characterize the systematic risk of industries facing different categories of economic policy uncertainty.

Suggested Citation

  • Yu, Honghai & Fang, Libing & Du, Donglei & Yan, Panpan, 2017. "How EPU drives long-term industry beta," Finance Research Letters, Elsevier, vol. 22(C), pages 249-258.
    • Handle: RePEc:eee:finlet:v:22:y:2017:i:c:p:249-258
    DOI: 10.1016/j.frl.2017.05.012
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    More about this item

    Keywords

    Industry beta; EPU; DCC-MIDAS; MIDAS regression;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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