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We use a wavelet based quantile-on-quantiles technique to explore the impact of economic policy uncertainty (EPU) and trade policy uncertainty (TPU) on the Chinese sector's markets. EPU, TPU and Chinese sector stocks monthly data from 2006 to 2022 were obtained from the data stream and separated into short, medium, and long-term datasets. First, th...
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Citations
... Therefore, to solve this problem, governments design regulatory frameworks to control such instabilities within the economy. These policies are often susceptible to uncertainties, which may delay investors' decision-making processes (Younis et al., 2024). ...
... Yu et al. (2024) examine the effect of EPU on resource rents (TRR), employing FMOLS and DOLS, their findings indicate that EPU has a detrimental effect on TRR. Younis et al. (2024) examine the effect of EPU and trade policy uncertainty (TPU) on industry-specific stock returns. Employing, wavelet-based QQR they found that in general EPU negatively affects the stock's return in the short term. ...
... To summarize, documented literature uses various econometric approaches namely DCC-GARCH, TVP-VAR, GARCH-MIDAS, and QQR to examine the nuanced relationship between EPU and sectoral returns of several markets (Balli et al., 2020;Choi, 2024;Naeem et al., 2023;Younis et al., 2024;Yousaf et al., 2023). However, the literature lacks a thorough examination of the Japanese market using a robust approach namely CQ. ...
The purpose of this study is to investigate the responses of sector economic activity of the Japanese stock market to Economic Policy Uncertainty (EPU). To investigate this relationship, we take monthly data covering ten sectors of Japan's economy and the EPU index spanning from January 2000 to January 2024. For the empirical analysis , we used a recently introduced approach, namely Cross-Quantilogram (CQ), and Quantile-on-Quantile Regression (QQR) for the robustness of the estimation output. Our findings indicate that EPU transmits negative and positive shocks to the Japa-nese sectors from bearish to bullish market states. Surprisingly, at the bearish state, we find that sector stocks respond negatively to the higher quantiles of EPU under short memory. Moreover, we also observed that EPU transmits a weak positive signal to sectors at medium quantiles. Similarly, we report a less pronounced effect of EPU on different sectors considering different memories (quarterly, biannual , and annual). Furthermore, our findings indicate that some sectors could serve as diversi-fiers in normal market conditions and are considered to be safe-haven against the EPU in bearish periods of economic activity. Our research has profound implications for portfolio managers, policy makers, and investors in terms of ensuring pro-active strategies and regulatory measures. Keywords Economic policy uncertainty · Sectoral returns · Cross-quantilogram · Quantile-on-quantile regression JEL Classification C32 · C58 · G10 · G11 · G14
... Therefore, to solve this problem, governments design regulatory frameworks to control such instabilities within the economy. These policies are often susceptible to uncertainties, which may delay investors' decision-making processes (Younis et al., 2024). ...
... Yu et al. (2024) examine the effect of EPU on resource rents (TRR), employing FMOLS and DOLS, their findings indicate that EPU has a detrimental effect on TRR. Younis et al. (2024) examine the effect of EPU and trade policy uncertainty (TPU) on industry-specific stock returns. Employing, wavelet-based QQR they found that in general EPU negatively affects the stock's return in the short term. ...
... To summarize, documented literature uses various econometric approaches namely DCC-GARCH, TVP-VAR, GARCH-MIDAS, and QQR to examine the nuanced relationship between EPU and sectoral returns of several markets (Balli et al., 2020;Choi, 2024;Naeem et al., 2023;Younis et al., 2024;Yousaf et al., 2023). However, the literature lacks a thorough examination of the Japanese market using a robust approach namely CQ. ...
The purpose of this study is to investigate the responses of sector economic activity of the Japanese stock market to Economic Policy Uncertainty (EPU). To investigate this relationship, we take monthly data covering ten sectors of Japan’s economy and the EPU index spanning from January 2000 to January 2024. For the empirical analysis, we used a recently introduced approach, namely Cross-Quantilogram (CQ), and Quantile-on-Quantile Regression (QQR) for the robustness of the estimation output. Our findings indicate that EPU transmits negative and positive shocks to the Japanese sectors from bearish to bullish market states. Surprisingly, at the bearish state, we find that sector stocks respond negatively to the higher quantiles of EPU under short memory. Moreover, we also observed that EPU transmits a weak positive signal to sectors at medium quantiles. Similarly, we report a less pronounced effect of EPU on different sectors considering different memories (quarterly, bi-annual, and annual). Furthermore, our findings indicate that some sectors could serve as diversifiers in normal market conditions and are considered to be safe-haven against the EPU in bearish periods of economic activity. Our research has profound implications for portfolio managers, policy makers, and investors in terms of ensuring proactive strategies and regulatory measures.
... However, the industries' responses to economic uncertainty differ. For example, EPU in the banking sector is associated with a positive strong response (Younis et al., 2024). Antonopoulou et al. (2022) added that the link between EPU in the banking sector is direct, and that it impacts the stock market returns. ...
... In particular, EPU exhibits the greatest negative impact on the Health Care industry and the smallest impact on the Financials industry. These results contradict the findings of Younis et al. (2024), who reported that EPU has a greater impact on banks relative to the Health Care industry. On the contrary, the volatility of the Basic Materials industry displays a positive and significant relationship with EPU. ...
In recent years, monetary authorities have used unconventional monetary policy practices to stabilize economies. As a result, economic policy uncertainties have increased; subsequently, this has created fragilities in financial markets and exposed investors to greater levels of investment risk. However, recent literature suggests that volatility dynamics differ across industries, with some industries having hedging capabilities. On this basis, this study's objective is to explore the impact of economic policy uncertainty (EPU) on the volatility of different industries in South Africa. The GARCH-MIDAS approach was employed to achieve this objective, and nine industry-specific indices were evaluated from 3 January 2000 to 29 December 2023. The industry-specific analysis revealed that EPU has a negative relationship with the volatility in the following four industries: consumer discretionary, financials, health care, and technology. However, a positive relationship was found for the basic materials industry, while no significant effect was reported for consumer staples, energy, industrials, and telecommunications. Overall, these findings indicate that the EPU effects are asymmetric across industries and, therefore, it follows that the impact of EPU should be accounted for when making asset allocation choices.
