Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Economic Policy Uncertainty and Emerging Stock Market Volatility

Economic Policy Uncertainty and Emerging Stock Market Volatility This research examines the effect of economic policy uncertainty (EPU) indices on Pakistan's stock market volatility. Particularly, we examine the impact of the economic policy uncertainty index for Pakistan and bilateral global trading partner countries, the US, China, and the UK. We employ the GARCH-MIDAS model and combination forecast approach to evaluate the performance of economic uncertainty indices. The empirical findings show that the US economic policy uncertainty index is a more powerful predictor of Pakistan stock market volatility. In addition, the EPU index for the UK also provides valuable information for equity market volatility prediction. Surprisingly, Pakistan and China EPU indices have no significant predictive information for volatility forecasting during the sample period. Lastly, we find evidence of all uncertainty indices during economic upheaval from the COVID-19 pandemic. We obtained identical results even during the Covid-19. Our findings are robust in various evaluation methods, like MCS tests and other forecasting windows. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Financial Markets Springer Journals

Economic Policy Uncertainty and Emerging Stock Market Volatility

Ghani, Maria; Ghani, Usman
Asia-Pacific Financial Markets , Volume OnlineFirst – May 24, 2023
Download PDF
17 pages

Loading next page...
 
/lp/springer-journals/economic-policy-uncertainty-and-emerging-stock-market-volatility-0QFtn700Ef

References (77)

Publisher
Springer Journals
Copyright
Copyright © The Author(s), under exclusive licence to Springer Japan KK, part of Springer Nature 2023. Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
ISSN
1387-2834
eISSN
1573-6946
DOI
10.1007/s10690-023-09410-1
Publisher site
See Article on Publisher Site

Abstract

This research examines the effect of economic policy uncertainty (EPU) indices on Pakistan's stock market volatility. Particularly, we examine the impact of the economic policy uncertainty index for Pakistan and bilateral global trading partner countries, the US, China, and the UK. We employ the GARCH-MIDAS model and combination forecast approach to evaluate the performance of economic uncertainty indices. The empirical findings show that the US economic policy uncertainty index is a more powerful predictor of Pakistan stock market volatility. In addition, the EPU index for the UK also provides valuable information for equity market volatility prediction. Surprisingly, Pakistan and China EPU indices have no significant predictive information for volatility forecasting during the sample period. Lastly, we find evidence of all uncertainty indices during economic upheaval from the COVID-19 pandemic. We obtained identical results even during the Covid-19. Our findings are robust in various evaluation methods, like MCS tests and other forecasting windows.

Journal

Asia-Pacific Financial Markets – Springer Journals

Published: May 24, 2023

Keywords: Economic policy uncertainty; Stock market volatility; GARCH-MIDAS model; MCS test; COVID-19

There are no references for this article.