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Policy Uncertainty and the Volatility of the S&P 500: Before and After the Launch of the S&P 500 ESG

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  • Manel Mahjoubi
  • Jamel Eddine Henchiri

Abstract

This paper examines the asymmetric effect of economic policy uncertainty, geopolitical risk, and climate policy uncertainty on the volatility of the S&P 500 stock index, before and after the launch of the S&P 500 ESG Index, by using a Non-linear Autoregressive Distributed Lag (NARDL) model, for the period January 2010 to august 2022.We provide evidence on the asymmetric impact of climate policy uncertainty on the volatility of the S&P 500 both in the short-run and in the long-run, and this asymmetry is more frequent after the launch of the S&P 500 ESG Index. Moreover, in the long-run, a decrease in the economic policy uncertainty after the launch of the S&P 500 ESG has greater effect on volatility of the S&P 500, than the short-run. We also find that positive and negative shocks to geopolitical risk before and after the launch of the S&P500 ESG index do not affect the volatility of the S&P 500 stock market index in the short -run and long.

Suggested Citation

  • Manel Mahjoubi & Jamel Eddine Henchiri, 2023. "Policy Uncertainty and the Volatility of the S&P 500: Before and After the Launch of the S&P 500 ESG," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(11), pages 1-28, November.
    • Handle: RePEc:ibn:ijefaa:v:15:y:2023:i:11:p:28
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    References listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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