Economic Policy Uncertainty, Short-Term Reversals, and Investor Sentiment

Andy C. W. Chui ()

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2023, vol. 26, issue 02, 1-34

Abstract: This study finds that the predictability of economic policy uncertainty on short-term reversals is stronger among stocks exposed more to the volatility index (VIX) and economic policy uncertainty index (EPU). In addition, the predictability of VIX on short-term reversals is stronger among stocks exposed more to this index and the Aruoba–Diebold–Scotti business conditions index (ADS). Furthermore, the finding is robust after controlling for the other popular investor sentiment indexes, the Fama–French five risk factors, financial crises, and firm size.

Keywords: Economic policy uncertainty; return reversals; liquidity provision; investor sentiment (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0219091523500108

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