Economic policy uncertainty and stock market crash risk: international evidence

Mahmoud Otaify and Toshitsugu Otake

Macroeconomics and Finance in Emerging Market Economies, 2025, vol. 18, issue 3, 490-510

Abstract: The current study seeks to investigate the impact of Economic Policy Uncertainty (EPU) on crash risk across 21 countries using monthly data over 13 years. Interestingly, higher EPU is associated with lower crash risk. The findings indicate that stock markets with high returns, volatility, liquidity, and undervaluation are less likely to experience market crashes. Moreover, the crash risk increased during the COVID-19 period. Conversely, the results indicate that the crash risk does not respond significantly to the Russian–Ukrainian war. The magnitude of the effects differs between developed and emerging countries.

Date: 2025
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DOI: 10.1080/17520843.2024.2440191

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