The Economic Policy Uncertainty and Its Effect on Sustainable Investment: A Panel ARDL Approach

Susilo Nur Aji Cokro Darsono, Wing-Keung Wong, Tran Thai Ha Nguyen and Dyah Titis Kusuma Wardani
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Susilo Nur Aji Cokro Darsono: Department of Business Administration, College of Management, Asia University, Taichung City 41354, Taiwan
Tran Thai Ha Nguyen: Department of Business Administration, College of Management, Asia University, Taichung City 41354, Taiwan
Dyah Titis Kusuma Wardani: Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Yogyakarta 55183, Indonesia

JRFM, 2022, vol. 15, issue 6, 1-17

Abstract: This study examines the effect of economic policy uncertainty (EPU) on sustainable investment returns by using panel data of stock market returns and the EPU index from twelve countries for the period from April 2015 to December 2020. In addition, precious metal prices, energy prices, and cryptocurrency prices are used as control variables. To do so, we investigate the impact of EPU, gold prices, oil prices, and Bitcoin prices on stock market returns by using the panel autoregressive distributed lag (ARDL) model to examine both the long-run correlation and short-run effect. Our findings show that EPU, gold prices, oil prices, and Bitcoin prices have a time-varying significant impact on sustainable stock market returns. We discovered that EPU has a significantly negative impact on the returns of the sustainable stocks in the markets over the long run. In contrast, the rise of the gold price, oil price, and Bitcoin price have a significantly positive impact on the returns of the sustainable stocks in the twelve sustainable markets in the long run. On the other hand, EPU in Singapore, Spain, the Netherlands, and Russia has a significant short-run impact on market returns in each country. Based on the findings, managers and investors in the sustainable stock markets are highly recommended to pay more attention to the volatility of EPU, gold prices, oil prices, and Bitcoin prices in the short run to control the risk of returns in the sustainable stock market. Furthermore, policymakers must closely monitor the movement of the EPU index, as it is a major driver of sustainable stock market returns.

Keywords: economic policy uncertainty; EPU; energy prices; panel ARDL; sustainable investment; sustainable stock market returns (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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