How does economic policy uncertainty comove with stock markets: New evidence from symmetric thermal optimal path method

Ying-Hui Shao, Yan-Hong Yang and Wei-Xing Zhou

Physica A: Statistical Mechanics and its Applications, 2022, vol. 604, issue C

Abstract: We revisit the dynamic relationship between domestic economic policy uncertainty and stock markets using the symmetric thermal optimal path (TOPS) method. We observe different interaction patterns in emerging and developed markets. Economic policy uncertainty drives the stock market in China, while stock markets play a leading role in the UK and the US. Meanwhile, the lead–lag relationships of the three countries react significantly to extreme events. Our findings have important implications for investors and policy makers.

Keywords: Economic policy uncertainty; Stock market; Lead–lag relationship; Symmetric thermal optimal path (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:604:y:2022:i:c:s0378437122004952

DOI: 10.1016/j.physa.2022.127745

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