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Economic uncertainty and cross section of stock returns: Australian evidence

Author

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  • Simkus, Matthew
  • Truong, Helen
  • Hoang, Khoa
  • Huang, Ronghong

Abstract

In this paper, we construct a new macroeconomic uncertainty index for the Australian economy. We then examine the pricing implication of macroeconomic uncertainty on the cross section of Australian equity returns. Our paper replicates Bali, Brown and Tang (2017)’s findings that U.S. investors pay (require) higher prices (lower premium) for stocks that perform well when economic uncertainty increases. We also find evidence supporting such premium in the Australian equity market.

Suggested Citation

  • Simkus, Matthew & Truong, Helen & Hoang, Khoa & Huang, Ronghong, 2022. "Economic uncertainty and cross section of stock returns: Australian evidence," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:pacfin:v:74:y:2022:i:c:s0927538x22001032
    DOI: 10.1016/j.pacfin.2022.101808
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroeconomic uncertainty; Cross-section of stock returns; Intertemporal CAPM;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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