Research On The Impact Of Economic Policy Uncertainty On Stock Returns

The outbreak of the global economic crisis in 2008 had a severe impact on the world's economies,and the global market was filled with panic.In order to cope with the crisis and stabilize the financial markets of various countries,governments have introduced relevant policies to strengthen market intervention.On the one hand,frequent policy intervention can alleviate the short-term economic problems of various countries,but on the other hand,it will affect the regulation effect of the market itself on the economy to some extent.The current economic environment is increasingly complex,and the reliance of markets on economic policies is increasing,which will lead to greater uncertainty of economic policies in the future.As a "barometer" of the macro economy and an important part of the financial market,the stock market plays a huge role in driving domestic demand and economic growth.In the future,with the gradual slowdown of the global economy,the emergence of the trend of anti-globalization and the evolution and development of the international trade order,countries will face a more complex and volatile external environment,which presents a new test for the development of policy makers and capital markets.In this context,this paper will systematically explore the impact of economic policy uncertainty on equity returns in G7 and brics countries.Secondly,the empirical research is carried out by dividing the market state and time period by dividing the market sample.Finally,the impact of us economic policy uncertainty on stock returns in the G7,brics and China is studied.In this paper,the latest research result of economic policy uncertainty index proposed by Baker et al.is used as a proxy indicator of economic policy uncertainty.This article selects between January 2003 and December 2018 the G7 and the brics and other 11 countries stock market data and reflection of the country's economic fundamentals economic data and fixed effects regression with panel,quantile regression and panel vector autoregression method system in-depth study of the uncertainty of economic policy impact on stock returns of the 11 countries.This study not only has reference significance for investors to reasonably allocate assets,but also has important significance for the government to reasonably formulate relevant policies,the regulatory authorities to improve the regulatory efficiency and the healthy development of the stock market.The results show that economic policy uncertainty has a significant negative impact on stock returns,and as stock returns rise from low quantile to high quantile,the negative impact of economic policy uncertainty on stock returns shows a trend of diminishing marginal effect.The negative impact of economic policy uncertainty on stock returns is asymmetrical,that is,when the stock returns are numbered in the middle and lower subdivision,the economic policy uncertainty has a significant impact on stock returns,while when the stock returns are numbered in the higher subdivision,the impact is not significant.And during the financial crisis,the impact of economic policy uncertainty on equity returns is more complex.The results of sub-sample study show that in brics countries,the impact of economic policy uncertainty on stock returns is asymmetric,but the economic policy uncertainty is not the granger cause of stock returns.In the G7 countries,economic policy uncertainty is the granger cause of equity returns.From the perspective of individual countries,except Russia and China,the impact of economic policy uncertainty on stock returns in other countries shows asymmetry.In China and Russia,the impact of economic policy uncertainty on stock returns is not significant.Finally,when studying the uncertainty of us economic policy on the returns of G7,brics and Chinese stocks,it is found that the uncertainty of us economic policy has a significant negative impact on the above regions and countries,indicating that the uncertainty of economic policy is contagious to some extent.Finally,on the basis of research,Suggestions are put forward for different subjects: the government should reduce the excessive intervention in the market,formulate forward-looking and sustainable policies on the premise of ensuring policy transparency,and give reasonable guidance to investors;The supervision department should improve the relevant market system,perfect the financial market system and improve the supervision efficiency.Investors should improve their ability to set reasonable expectations and avoid irrational behavior.