Economic policy uncertainty and stock prices in BRIC countries: evidence from asymmetric frequency domain causality approach

Mucahit Aydin, Uğur Pata () and Veysel Inal

Applied Economic Analysis, 2021, vol. 30, issue 89, 114-129

Abstract: Purpose - The aim of this study is to investigate the relationship between economic policy uncertainty (EPU) and stock prices during the period from March 2003 to March 2021. Design/methodology/approach - The study uses asymmetric and symmetric frequency domain causality tests and focuses on BRIC countries, namely, Brazil, Russia, India and China. Findings - The findings of the symmetric causality test confirm unidirectional permanent causality from EPU to stock prices for Brazil and India and bidirectional causality for China. However, according to the asymmetric causality test, the findings for China show that there is no causality between the variables. The results for Brazil and India indicate that there is unidirectional permanent causality from positive components of EPU to positive components of stock prices. Moreover, for Brazil, there is unidirectional temporary causality from the negative components of EPU to the negative components of stock prices. For India, there is temporary causality in the opposite direction. Originality/value - The reactions of financial markets to positive and negative shocks differ. In this context, to the best of the authors’ knowledge, this study is the first attempt to examine the causal relationships between stock prices and uncertainty using an asymmetric frequency domain approach. Thus, the study enables the analysis of the effects of positive and negative shocks in the stock market separately.

Keywords: Asymmetric causality; BRIC countries; Economic policy uncertainty; Frequency domain analysis; Stock prices (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:aeapps:aea-12-2020-0172

DOI: 10.1108/AEA-12-2020-0172

Access Statistics for this article

Applied Economic Analysis is currently edited by Carmen Díaz-Mora and Francisco Requena

More articles in Applied Economic Analysis from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().