Impacts of economic policy uncertainty on the time-varying risk-return relationship: evidence from G7 countries

This paper examines the impact of country-specific and global economic policy uncertainty (EPU) on the time-varying risk - return relationship in G7 stock markets and explores whether this impact is significantly different during the 2008 Global Financial Crisis (GFC). Empirical results suggest that...

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Bibliographic Details
Published in:Applied economics letters 2024-02, Vol.31 (4), p.270-274
Main Authors: He, Zhifang, Zheng, Jie
Format: Article
Language:English
Subjects:
Economic analysis
Economic crisis
Economic policy
Economic policy uncertainty
G7 countries
GARCH-M model
International finance
International trade
Risk
risk-return relationship
Securities markets
Stock exchanges
Uncertainty
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Summary:This paper examines the impact of country-specific and global economic policy uncertainty (EPU) on the time-varying risk - return relationship in G7 stock markets and explores whether this impact is significantly different during the 2008 Global Financial Crisis (GFC). Empirical results suggest that the risk - return trade-off varies with many factors. More importantly, we find that both the national and global EPU shocks have significant and negative impacts on the time-varying risk - return relationship in all G7 countries, and these negative impacts increase and intensify during the GFC.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2022.2131709