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A Note on the Transmission of Policy Uncertainty Shocks on Asia-Pacific Stock Returns

Author

Listed:
  • Idris A. Adediran
  • Emeka O. Akpa

    (Centre for Econometrics and Applied Research, Ibadan, Nigeria)

Abstract

This study explores the transmission of various policy uncertainty shocks—such as financial market uncertainty (using the Chicago Board Options Exchange Volatility Index), macroeconomic policy uncertainty (using the Global Economic Policy Uncertainty), and anthropogenic uncertainty (using geopolitical risks)—to Asia-Pacific country (APC) stock returns. We adapt a homogeneous panel vector autoregressive model for the distinct analysis of emerging and advanced APCs. Our major findings are that 1) APC stocks are vulnerable to financial and macroeconomic policy uncertainty shocks but less affected by geopolitical risks and 2) the negative impacts of policy uncertainty indicators are greater and longer lasting in advanced APCs than in emerging APCs. The more resilient emerging APC stocks have diversification benefits for investors. Our findings are robust to considerations of nominal and real stock returns.

Suggested Citation

  • Idris A. Adediran & Emeka O. Akpa, 2023. "A Note on the Transmission of Policy Uncertainty Shocks on Asia-Pacific Stock Returns," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 3(3), pages 1-7.
    • Handle: RePEc:ayb:jrnael:64
    DOI: 2023/03/09
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    References listed on IDEAS

    as
    1. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    2. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
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    More about this item

    Keywords

    policy uncertainty; stock returns; homogenous panel var; asia-pacific;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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