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Asymmetric effects of economic policy uncertainty on stock returns under different market conditions: evidence from G7 stock markets

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  • Wei-Qiang Huang
  • Peipei Liu

Abstract

This article applies quantile regression approaches to investigate the asymmetric effects of economic policy uncertainty (EPU) on G7 stock returns by dividing EPU changes into EPU increases and EPU decreases. We observe that EPU increases have greater impacts on G7 stock returns than EPU decreases, which confirms that asymmetric effects do exist. Furthermore, our results show that EPU changes have asymmetric impacts on Japan, Canada, the UK, and the US stock returns in the bearish market but not in the bullish market. In addition, there are no asymmetric effects of EPU changes on Germany stock returns.

Suggested Citation

  • Wei-Qiang Huang & Peipei Liu, 2022. "Asymmetric effects of economic policy uncertainty on stock returns under different market conditions: evidence from G7 stock markets," Applied Economics Letters, Taylor & Francis Journals, vol. 29(9), pages 780-784, May.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:9:p:780-784
    DOI: 10.1080/13504851.2021.1885606
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    Cited by:

    1. Shi, Yujie & Wang, Liming, 2023. "Comparing the impact of Chinese and U.S. economic policy uncertainty on the volatility of major global stock markets," Global Finance Journal, Elsevier, vol. 57(C).
    2. Yunpeng Su & Jia Li & Baochen Yang & Yunbi An, 2024. "The Impacts of Policy Uncertainty on Asset Prices: Evidence from China’s Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(4), pages 1087-1133, December.
    3. Xiao, Jihong & Jiang, Jiajie & Zhang, Yaojie, 2024. "Policy uncertainty, investor sentiment, and good and bad volatilities in the stock market: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    4. Salah A. Nusair & Jamal A. Al-Khasawneh, 2023. "Changes in oil price and economic policy uncertainty and the G7 stock returns: evidence from asymmetric quantile regression analysis," Economic Change and Restructuring, Springer, vol. 56(3), pages 1849-1893, June.
    5. Han Liu & Peng Yang & Haiyan Song & Doris Chenguang Wu, 2024. "Global and domestic economic policy uncertainties and tourism stock market: Evidence from China," Tourism Economics, , vol. 30(3), pages 567-591, May.
    6. Oluwatomisin J. Oyewole & Idowu A. Adubiagbe & Oluwasegun B. Adekoya, 2022. "Economic policy uncertainty and stock returns among OPEC members: evidence from feasible quasi-generalized least squares," Future Business Journal, Springer, vol. 8(1), pages 1-10, December.
    7. Cristiane Gea & Marcelo Cabus Klotzle & Luciano Vereda & Antonio Carlos Figueiredo Pinto, 2023. "Pricing uncertainty in the Brazilian stock market: do size and sustainability matter?," SN Business & Economics, Springer, vol. 3(1), pages 1-37, January.

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