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Preventing crash in stock market: The role of economic policy uncertainty during COVID-19

Peng-Fei Dai, Xiong Xiong, Zhifeng Liu, Toan Huynh () and Jianjun Sun

Papers from arXiv.org

Abstract: This paper investigates the impact of economic policy uncertainty (EPU) on the crash risk of US stock market during the COVID-19 pandemic. To this end, we use the GARCH-S (GARCH with skewness) model to estimate daily skewness as a proxy for the stock market crash risk. The empirical results show the significantly negative correlation between EPU and stock market crash risk, indicating the aggravation of EPU increase the crash risk. Moreover, the negative correlation gets stronger after the global COVID-19 outbreak, which shows the crash risk of the US stock market will be more affected by EPU during the pandemic.

Date: 2020-10, Revised 2021-08
New Economics Papers: this item is included in nep-isf and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published in Financial Innovation, 2021, 7(1): 1-15,

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