Economic policy uncertainty and industry return predictability – Evidence from the UK
Abstract
This paper examines whether local, regional, and global policy uncertainty shocks predict the sector returns of the UK stock market. Consistent with the market integration literature, we find global policy uncertainty shock is the major predictor of sector returns. Our second contribution is that the predictability of returns is dependent on the state of the business cycle. Finally, the evidence of predictability is strongest at the 6-month horizon, revealing that the impact of policy uncertainty shocks lasts for a few months. Our findings hold even after controlling for well-known risk factors and different sub-samples of data.
RAS ID
45229
Document Type
Journal Article
Date of Publication
11-1-2022
Volume
82
School
School of Business and Law
Copyright
subscription content
Publisher
Elsevier
Recommended Citation
Golab, A., Bannigidadmath, D., Pham, T. N., & Thuraisamy, K. (2022). Economic policy uncertainty and industry return predictability – Evidence from the UK. DOI: https://doi.org/10.1016/j.iref.2022.07.006
Comments
Golab, A., Bannigidadmath, D., Pham, T. N., & Thuraisamy, K. (2022). Economic policy uncertainty and industry return predictability–Evidence from the UK. International Review of Economics & Finance, 82, p. 433-447. https://doi.org/10.1016/j.iref.2022.07.006