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Do Asian emerging stock markets react to international economic policy uncertainty and geopolitical risk alike? A quantile regression approach

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  • Kannadhasan, M.
  • Das, Debojyoti

Abstract

We compare and contrast the impact of Economic Policy Uncertainty (EPU) and Geopolitical Risk (GPR) related shocks on the Asian emerging stock markets by resorting to the quantile regression approach. We find that: (a) EPU holds a consistent negative relationship across all quantiles, whereas GPR is negatively related in the lower quantiles and positively related in the intermediate and upper quantiles, (b) negative impact of EPU is stronger than the negative impact of GPR and (c) the dependence of stock returns with EPU and GPR is asymmetric. We believe our findings adds a new dimension to the existing literature and also important to the market participants for portfolio allocation in the emerging markets.

Suggested Citation

  • Kannadhasan, M. & Das, Debojyoti, 2020. "Do Asian emerging stock markets react to international economic policy uncertainty and geopolitical risk alike? A quantile regression approach," Finance Research Letters, Elsevier, vol. 34(C).
    • Handle: RePEc:eee:finlet:v:34:y:2020:i:c:s1544612318305014
    DOI: 10.1016/j.frl.2019.08.024
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    More about this item

    Keywords

    Emerging markets; Asia; Quantile regression; Economic policy uncertainty; Geopolitical risk;
    All these keywords.

    JEL classification:

    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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