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Time-frequency effect of investor sentiment, economic policy uncertainty, and crude oil on international stock markets: evidence from wavelet quantile analysis

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  • Huiming Zhu
  • Hao Wu
  • Yinghua Ren
  • Dongwei Yu

Abstract

This paper employs the wavelet-based quantile method to examine the time and frequency effect of investor sentiment, economic policy uncertainty, and crude oil on emerging and developed stock markets over the monthly sample range from September 2005 to December 2020. We first explore the relationship between various markets, and our empirical results reveal a strong long-term spillover effect of sentiment on returns from developed to emerging markets. Meanwhile, we find the negative influence of EPU gradually strengthens from the short-term towards the long-term. Further, oil shocks to stock returns are highly related to investment horizons and market circumstances. Specifically, the correlation is negative in the medium-term while positive in the short- and long-term, and more evident when stock markets are in a bearish or bullish state. In short, investors should take the structure dependence in terms of time and frequency when participating in financial markets.

Suggested Citation

  • Huiming Zhu & Hao Wu & Yinghua Ren & Dongwei Yu, 2022. "Time-frequency effect of investor sentiment, economic policy uncertainty, and crude oil on international stock markets: evidence from wavelet quantile analysis," Applied Economics, Taylor & Francis Journals, vol. 54(53), pages 6116-6146, November.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:53:p:6116-6146
    DOI: 10.1080/00036846.2022.2057912
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    Cited by:

    1. Salah A. Nusair & Jamal A. Al-Khasawneh, 2023. "Changes in oil price and economic policy uncertainty and the G7 stock returns: evidence from asymmetric quantile regression analysis," Economic Change and Restructuring, Springer, vol. 56(3), pages 1849-1893, June.

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