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Evidence of Economic Policy Uncertainty and COVID-19 Pandemic on Global Stock Returns

Department of Finance, LeBow College of Business, Drexel University, 3220 Market Street, Philadelphia, PA 19104, USA
Academic Editor: Thanasis Stengos
J. Risk Financial Manag. 2022, 15(1), 28; https://doi.org/10.3390/jrfm15010028
Received: 30 September 2021 / Revised: 10 December 2021 / Accepted: 14 December 2021 / Published: 10 January 2022
(This article belongs to the Special Issue Volatility Modelling and Forecasting)
This paper examines the impact of changes in economic policy uncertainty (EPU) and COVID-19 shock on stock returns. Tests of 16 global stock market indices, using monthly data from January 1990 to August 2021, suggest a negative relation between the stock return and a country’s EPU. Evidence suggests that a rise in the U.S. EPU causes not only a decline in a country’s stock return, but also a negative spillover effect on the global market; however, we cannot find a comparable negative effect from global EPU to U.S. stocks. Evidence suggests that the COVID-19 pandemic has a negative impact that significantly affects stock return worldwide. This study also finds an indirect COVID-19 impact that runs through a change in domestic EPU and, in turn, affects stock return. Evidence shows significant COVID-19 effects that change relative stock returns between the U.S. and global markets, creating a decoupling phenomenon. View Full-Text
Keywords: economic policy uncertainty; COVID-19; equity market volatility; GARCH model; global market; uncertainty premium economic policy uncertainty; COVID-19; equity market volatility; GARCH model; global market; uncertainty premium
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MDPI and ACS Style

Chiang, T.C. Evidence of Economic Policy Uncertainty and COVID-19 Pandemic on Global Stock Returns. J. Risk Financial Manag. 2022, 15, 28. https://doi.org/10.3390/jrfm15010028

AMA Style

Chiang TC. Evidence of Economic Policy Uncertainty and COVID-19 Pandemic on Global Stock Returns. Journal of Risk and Financial Management. 2022; 15(1):28. https://doi.org/10.3390/jrfm15010028

Chicago/Turabian Style

Chiang, Thomas C. 2022. "Evidence of Economic Policy Uncertainty and COVID-19 Pandemic on Global Stock Returns" Journal of Risk and Financial Management 15, no. 1: 28. https://doi.org/10.3390/jrfm15010028

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