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Economic uncertainty and cross section of stock returns: Australian evidence

Matthew Simkus, Helen Truong, Khoa Hoang and Ronghong Huang

Pacific-Basin Finance Journal, 2022, vol. 74, issue C

Abstract: In this paper, we construct a new macroeconomic uncertainty index for the Australian economy. We then examine the pricing implication of macroeconomic uncertainty on the cross section of Australian equity returns. Our paper replicates Bali, Brown and Tang (2017)’s findings that U.S. investors pay (require) higher prices (lower premium) for stocks that perform well when economic uncertainty increases. We also find evidence supporting such premium in the Australian equity market.

Keywords: Macroeconomic uncertainty; Cross-section of stock returns; Intertemporal CAPM (search for similar items in EconPapers)
JEL-codes: C13 E20 E30 G11 G12 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.pacfin.2022.101808

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Handle: RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x22001032