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Economic policy uncertainty and industry return predictability – Evidence from the UK
journal contribution
posted on 2022-09-29, 02:55 authored by A Golab, D Bannigidadmath, T N Pham, Kannan ThuraisamyKannan ThuraisamyThis 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.
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Journal
International Review of Economics and FinanceVolume
82Pagination
433 - 447Publisher DOI
ISSN
1059-0560Publication classification
C1 Refereed article in a scholarly journalUsage metrics
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