Can U.S. trade policy uncertainty help in predicting stock market excess return?

Dakai Li, Fan Zhang and Xuezhi Li

Finance Research Letters, 2022, vol. 49, issue C

Abstract: This study mainly sheds additional light on the role of U.S. trade policy uncertainty in forecasting equity premium. Theoretically, the trade policy uncertainty can exert a negative impact on stock market and economic system from exporter/importer and investor sentiment channels. Our empirical results show that the trade policy uncertainty can successfully predict the U.S. equity premium. Furthermore, we find that the superior forecasting performance of trade policy uncertainty is reflected in the period of recession.

Keywords: Trade policy uncertainty; Equity premium; Return predictability (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003592

DOI: 10.1016/j.frl.2022.103136

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