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The impact of economic policy uncertainty on stock prices

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  • Ginn, William

Abstract

This study employs a panel local projections (LP) model to analyze the influence of economic policy uncertainty on real equity returns based on thirteen economies, collectively accounting for 77.4 % of global output. Utilizing both linear and non-linear LP models, we demonstrate that economic policy uncertainty exerts a negative impact on real equity returns. Moreover, the non-linear LP model reveals that uncertainty amplifies real equity return losses, particularly during non-expansionary periods, where the impact is twice as high on impact and exhibits greater persistence. These findings offer valuable insights for policymakers and investors.

Suggested Citation

  • Ginn, William, 2023. "The impact of economic policy uncertainty on stock prices," Economics Letters, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004585
    DOI: 10.1016/j.econlet.2023.111432
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    More about this item

    Keywords

    Equity prices; Linear and nonlinear local projections; and Economic policy uncertainty;
    All these keywords.

    JEL classification:

    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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