scholarly journals Susceptibility of Stock Market Returns to International Economic Policy: Evidence from Effective Transfer Entropy of Africa with the Implication for Open Innovation

2020 ◽  
Vol 6 (3) ◽  
pp. 71 ◽  
Author(s):  
Anokye M. Adam
Keyword(s):  
South Africa ◽  
International Economic ◽  
Economic Policy ◽  
Stock Market ◽  
Stock Markets ◽  
Open Innovation ◽  
Transfer Entropy ◽  
Policy Uncertainty ◽  
Economic Policy Uncertainty ◽  
Effective Transfer

This study contributes to the scant finance literature on information flow from international economic policy uncertainty to emerging stock markets in Africa, using daily US economic policy uncertainty as a proxy and the daily stock market index for Botswana, Egypt, Ghana, Kenya, Morocco, Nigeria, Namibia, South Africa, and Zambia from 31 December 2010 to 27 May 2020, using the Rényi effective transfer entropy. International economic policy uncertainty transmits significant information to Egypt, Ghana, Morocco, Namibia, and South Africa, and insignificant information to Botswana, Kenya, Nigeria, and Zambia. The asymmetry in the information transfer tends to make the African market an alternative for the diversification of international portfolios when the uncertainty of the global economic policy is on the rise. The findings also have implications for the adoption of open innovation in African stock markets.

Mixed frequency domain spillover effect of international economic policy uncertainty on stock market

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shuzhen Zhu ◽  
Xiaofei Wu ◽  
Zhen He ◽  
Yining He
Keyword(s):  
International Economic ◽  
Economic Policy ◽  
Stock Market ◽  
Frequency Domain ◽  
Time Domain ◽  
Spillover Effect ◽  
Spillover Effects ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty

Purpose The purpose of this paper is to construct a frequency-domain framework to study the asymmetric spillover effects of international economic policy uncertainty on China’s stock market industry indexes. Design/methodology/approach This paper follows the time domain spillover model, asymmetric spillover model and frequency domain spillover model, which not only studies the degree of spillover in time domain but also studies the persistence of spillover effect in frequency domain. Findings It is found that China’s economic policy uncertainty plays a dominant role in the spillover effect on the stock market, while the global and US economic policy uncertainty is relatively weak. By decomposing realized volatility into quantified asymmetric risks of “good” volatility and “bad” volatility, it is concluded that economic policy uncertainty has a greater impact on stock downside risk than upside risk. For different time periods, the sensitivity of long-term and short-term spillover economic policy impact is different. Among them, asymmetric high-frequency spillover in the stock market is more easily observed, which provides certain reference significance for the stability of the financial market. Originality/value The originality aims at extending the traditional research paradigm of “time domain” to the research perspective of “frequency domain.” This study uses the more advanced models to analyze various factors from the static and dynamic levels, with a view to obtain reliable and robust research conclusions.

scholarly journals Role of Economic Policy Uncertainty in the Connectedness of Cross-Country Stock Market Volatilities

Mathematics ◽  
2020 ◽  
Vol 8 (11) ◽  
pp. 1904
Author(s):  
Mudassar Hasan ◽  
Muhammad Abubakr Naeem ◽  
Muhammad Arif ◽  
Syed Jawad Hussain Shahzad ◽  
Safwan Mohd Nor
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Stock Markets ◽  
Implied Volatility ◽  
Policy Uncertainty ◽  
Cross Sectional ◽  
Economic Policy Uncertainty ◽  
Cross Country ◽  
Global Stock Markets ◽  
Country Specific

The implied volatility index is a forward-looking indicator of fear among stock market participants. We examine the extent to which the connectedness of fear among global stock markets is driven by the cross-country connectedness of economic policy uncertainty (EPU). We use data on stock market fear and EPU indices for 13 countries, which spans from January 2011 to December 2018. To measure the connectedness among stock market fear and EPU of our sample countries, we employ two connectedness models. A cross-sectional regression model is further employed to ascertain the extent to which EPU connectedness between two countries explains the connectedness of fear between their stock markets, while controlling for bilateral linkage and country-specific factors. We find that EPU connectedness between any two partner countries significantly drives the connectedness of fear between their stock markets. The driving potential not only holds for short- and long-term connectedness, but also after controlling for bilateral linkages (bilateral trade, geographical distance, common language) and country-specific (trade and financial openness of the transmitter country) factors indicating robustness in our results.

US economic policy uncertainty spillover on the stock markets of the GCC countries

2020 ◽  
Vol 47 (1) ◽  
pp. 36-50 ◽  
Author(s):  
Khandokar Istiak ◽  
Md Rafayet Alam
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Stock Markets ◽  
Risk Sharing ◽  
Financial System ◽  
Policy Uncertainty ◽  
Content Type ◽  
Economic Policy Uncertainty ◽  
Gcc Countries ◽  
The Us

PurposeThis study aims to investigate the nature and degree of US economic policy uncertainty spillover on the stock markets of a group of non-conventional economies like the Gulf Cooperation Council (GCC) countries, where a risk-sharing-based financial system is prominent and foreign investment, risk-free interest, derivatives, etc. are not as widespread as in the western economies.Design/methodology/approachthe monthly data of 1992–2018, linear and nonlinear structural vector autoregression (VAR) model, and an impulse response-based test to explore the nature and degree of US economic policy uncertainty spillover on the stock markets of the GCC countries.FindingsThis study finds that an unexpected increase in the US economic policy uncertainty significantly decreases the stock market index of all the GCC countries. This study also gets this relationship symmetric, meaning that the GCC stock market indices decrease and increase by the same amount when the US economic policy uncertainty increases and decreases, respectively.Originality/valueThis study investigates the characteristics of economic policy uncertainty spillover from the biggest economy of the world to the stock markets of the GCC region, which is new to the literature. The study results provide the first evidence that a risk-sharing based financial system does not necessarily protect the stock market from US uncertainty shock. However, the abundance of local investors, risk-sharing investment activities, the absence of derivatives, etc. may be responsible for the symmetric behavior of a stock market.

scholarly journals The Reaction of Stock Markets in the Gulf Cooperation Council Countries to Economic Policy Uncertainty in the United States

2019 ◽  
Vol 33 (1) ◽  
pp. 22-34
Author(s):  
Abdullah Saeed S Alqahtani ◽  
Hongbing Ouyang ◽  
Adam Ali
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
United Arab Emirates ◽  
Stock Markets ◽  
Negative Relationship ◽  
The United States ◽  
Policy Uncertainty ◽  
Stock Market Returns ◽  
Economic Policy Uncertainty ◽  
The U.S

Abstract This study investigates if the changes in economic policy uncertainty in the U.S. can explain the returns on stock markets of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The study also examines how the stock market returns of the six GCC countries respond to the changes in economic policy uncertainty in the U.S. The results demonstrate that changes in economic policy uncertainty in the U.S. are not significantly linked with the returns on all the stock markets except Oman stock market, which shows a statistical significant negative relationship with the changes in economic policy uncertainty in the U.S. Controlling for the effects of the U.S. stock market and oil price, returns on all the six GCC markets including Oman show insignificant coefficients. The returns on all the stock markets do not respond to the changes in economic policy uncertainty. The results of Granger causality tests show that the changes in economic policy uncertainty in the U.S. do not cause the returns of all the six GCC stock markets.

scholarly journals Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market

Mathematics ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 1411
Author(s):  
Xiaqing Su ◽  
Zhe Liu
Keyword(s):  
Economic Policy ◽  
Stock Market ◽  
Asset Allocation ◽  
Policy Uncertainty ◽  
Volatility Spillover ◽  
Economic Policy Uncertainty ◽  
Long Run ◽  
Transmission Structure ◽  
Long Term Impact

Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials sectors are systemically important industries during the sample period. Further research of dynamic analysis shows that each sector acts in a time-varying role in this structure. The results of the GARCH-MIDAS regression indicate that none of the selected EPU indexes has a significant long-term impact on the total volatility spillover of the inter-sector stock market in China. However, the EPUs do affect some sectors’ spillover indexes in the long run, and they are significantly heterogeneous. This paper can provide regulatory suggestions for policymakers and reasonable asset allocation and risk avoidance methods for investors.

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