Dynamic Co-movements between Stock Market Returns and Policy Uncertainty

Nikolaos Antonakakis, Ioannis Chatziantoniou and George Filis

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we examine the extent of time-varying correlations between stock markets returns and policy uncertainty based on a newly introduced uncertainty index by Baker et al. (2012). We identify several empirical regularities: (1) the dynamic correlations of policy uncertainty and stock market returns are consistently negative. (2) Increased stock market volatility increases policy uncertainty and dampens stock markets returns. (3) Increases in the volatility of policy uncertainty lead to negative stock market returns and increased uncertainty. (4) Oil specific demand shocks and domestic shocks (price and income shocks) lead to further increase in the negative correlation between policy uncertainty and stock market returns.

Keywords: Policy uncertainty; dynamic correlation; stock market return; oil shock (search for similar items in EconPapers)
JEL-codes: C32 E60 E66 G10 G18 (search for similar items in EconPapers)
Date: 2012-11-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/42905/1/MPRA_paper_42905.pdf original version (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:pra:mprapa:42905

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().