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How EPU drives long-term industry beta

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  • Yu, Honghai
  • Fang, Libing
  • Du, Donglei
  • Yan, Panpan

Abstract

Based on the DCC-MIDAS framework, we estimate the long-term beta of 10 industries driven by Economic Policy Uncertainty (EPU) in the US. The results demonstrate that EPU significantly drives industry beta. The driving effects on different industries are further analyzed along with the related stock market turmoil. The effects of 10 categories of specific EPU on industries’ beta are also presented. The findings help to characterize the systematic risk of industries facing different categories of economic policy uncertainty.

Suggested Citation

  • Yu, Honghai & Fang, Libing & Du, Donglei & Yan, Panpan, 2017. "How EPU drives long-term industry beta," Finance Research Letters, Elsevier, vol. 22(C), pages 249-258.
    • Handle: RePEc:eee:finlet:v:22:y:2017:i:c:p:249-258
    DOI: 10.1016/j.frl.2017.05.012
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    6. Jiang, Cuixia & Xiong, Wei & Xu, Qifa & Liu, Yezheng, 2021. "Predicting default of listed companies in mainland China via U-MIDAS Logit model with group lasso penalty," Finance Research Letters, Elsevier, vol. 38(C).
    7. Mehmet Balcilar & Riza Demirer & Festus V. Bekun, 2021. "Flexible Time-Varying Betas in a Novel Mixture Innovation Factor Model with Latent Threshold," Mathematics, MDPI, vol. 9(8), pages 1-20, April.
    8. Yumiao Wang & Dongmin Kong, 2022. "Economic Policy Uncertainty and the Energy Stock Market - Evidence From China," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 3(1), pages 1-4.
    9. Fedorova, Elena & Ledyaeva, Svetlana & Drogovoz, Pavel & Nevredinov, Alexandr, 2022. "Economic policy uncertainty and bankruptcy filings," International Review of Financial Analysis, Elsevier, vol. 82(C).
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    12. Noam Bergman & Tim Foxon, 2018. "Reorienting Finance Towards Energy Efficiency: The Case of UK Housing," SPRU Working Paper Series 2018-05, SPRU - Science Policy Research Unit, University of Sussex Business School.
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    More about this item

    Keywords

    Industry beta; EPU; DCC-MIDAS; MIDAS regression;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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