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Economic Policy Uncertainty and Investor Sentiment: linear and nonlinear causality analysis

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  • Bing Zhang

Abstract

In this paper, we study the relationship between economic policy uncertainty and investor sentiment. US data were analysed based on linear and non-linear Granger causality analysis. We reveal the obvious impact that economic policy uncertainty has on the investor sentiment, which can be explained by the real option and financial constraint theory.

Suggested Citation

  • Bing Zhang, 2019. "Economic Policy Uncertainty and Investor Sentiment: linear and nonlinear causality analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 26(15), pages 1264-1268, September.
  • Handle: RePEc:taf:apeclt:v:26:y:2019:i:15:p:1264-1268
    DOI: 10.1080/13504851.2018.1545073
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    Cited by:

    1. Assaf, Ata & Charif, Husni & Mokni, Khaled, 2021. "Dynamic connectedness between uncertainty and energy markets: Do investor sentiments matter?," Resources Policy, Elsevier, vol. 72(C).
    2. Scarcioffolo, Alexandre R. & Etienne, Xiaoli L., 2021. "Regime-switching energy price volatility: The role of economic policy uncertainty," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 336-356.
    3. Yang, Jianlei, 2023. "Financial stabilization policy, market sentiment, and stock market returns," Finance Research Letters, Elsevier, vol. 52(C).
    4. Liang, Chao & Goodell, John W. & Li, Xiafei, 2024. "Impacts of carbon market and climate policy uncertainties on financial and economic stability: Evidence from connectedness network analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    5. Xia, Tongshui & Yao, Chen-Xi & Geng, Jiang-Bo, 2020. "Dynamic and frequency-domain spillover among economic policy uncertainty, stock and housing markets in China," International Review of Financial Analysis, Elsevier, vol. 67(C).
    6. Chen, Wen-Yi & Chen, Mei-Ping, 2022. "Twitter’s daily happiness sentiment, economic policy uncertainty, and stock index fluctuations," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    7. Guo, Haifeng & Hung, Chi-Hsiou D. & Kontonikas, Alexandros, 2021. "Investor sentiment and the pre-FOMC announcement drift," Finance Research Letters, Elsevier, vol. 38(C).
    8. Long, Shaobo & Pei, Hongxia & Tian, Hao & Li, Fangfang, 2021. "Asymmetric impacts of economic policy uncertainty, capital cost, and raw material cost on China’s investment," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 129-144.
    9. Mohammed, Kamel Si & Obeid, Hassan & Oueslati, Karim & Kaabia, Olfa, 2023. "Investor sentiments, economic policy uncertainty, US interest rates, and financial assets: Examining their interdependence over time," Finance Research Letters, Elsevier, vol. 57(C).
    10. Mikhail Stolbov & Maria Shchepeleva, 2023. "Sentiment-based indicators of real estate market stress and systemic risk: international evidence," Annals of Finance, Springer, vol. 19(3), pages 355-382, September.
    11. Szczygielski, Jan Jakub & Charteris, Ailie & Bwanya, Princess Rutendo & Brzeszczyński, Janusz, 2024. "Google search trends and stock markets: Sentiment, attention or uncertainty?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    12. Umar, Zaghum & Mokni, Khaled & Escribano, Ana, 2022. "Connectedness between the COVID-19 related media coverage and Islamic equities: The role of economic policy uncertainty," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    13. He, Zhifang, 2023. "Geopolitical risks and investor sentiment: Causality and TVP-VAR analysis," The North American Journal of Economics and Finance, Elsevier, vol. 67(C).
    14. Saifullah Khan & Adnan Shoaib, 2024. "Firm value adjustment speed through financial friction in the presence of earnings management and productivity growth: evidence from emerging economies," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    15. Qiao, Xingzhi & Zhu, Huiming & Zhang, Zhongqingyang & Mao, Weifang, 2022. "Time-frequency transmission mechanism of EPU, investor sentiment and financial assets: A multiscale TVP-VAR connectedness analysis," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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