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Tail risk spillovers between economic policy uncertainty and stock market returns: Evidence based on TENET approach

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  • Mo, Tingcheng
  • Huangmei, Mengmeng
  • Chen, Hong
  • Li, Kelong
  • Ouyang, Yingbo

Abstract

We construct a tail-event-driven network (TENET) to explore the tail risk spillovers between economic policy uncertainty (EPU) and stock market returns (SMR) at three levels: system, region and country. The empirical results show that (i) when major emergencies occur, the tail risk spillovers increase rapidly; (ii) the spillover effects from EPU to SMR are greater than those from SMR to EPU, indicating that EPU exerts a stronger influence; and (iii) both the EPU and SMR of America act as net risk senders, with the EPU of the United States playing a dominant role in the tail risk spillover network.

Suggested Citation

  • Mo, Tingcheng & Huangmei, Mengmeng & Chen, Hong & Li, Kelong & Ouyang, Yingbo, 2024. "Tail risk spillovers between economic policy uncertainty and stock market returns: Evidence based on TENET approach," Finance Research Letters, Elsevier, vol. 69(PB).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pb:s1544612324012339
    DOI: 10.1016/j.frl.2024.106204
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    References listed on IDEAS

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