TY - JOUR
T1 - Oil shocks, policy uncertainty and stock market return
AU - Kanga, Wensheng
AU - Ratti, Ronald A.
PY - 2013
Y1 - 2013
N2 - Oil price shocks and economic policy uncertainty are interrelated and influence stock market return. For the U.S. an unanticipated increase in policy uncertainty has a significant negative effect on real stock returns. A positive oil-market specific demand shock (indicating greater concern about future oil supplies) significantly raises economic policy uncertainty and reduces real stock returns. The direct effects of oil shocks on real stock returns are amplified by endogenous policy uncertainty responses. Economic policy uncertainty and oil-market specific demand shock account for 19% and 12% of the long-run variability in real stock returns, respectively. As a robustness check, (domestic) economic policy uncertainty is shown to also significantly influence real stock returns in Europe and in energy-exporting Canada.
AB - Oil price shocks and economic policy uncertainty are interrelated and influence stock market return. For the U.S. an unanticipated increase in policy uncertainty has a significant negative effect on real stock returns. A positive oil-market specific demand shock (indicating greater concern about future oil supplies) significantly raises economic policy uncertainty and reduces real stock returns. The direct effects of oil shocks on real stock returns are amplified by endogenous policy uncertainty responses. Economic policy uncertainty and oil-market specific demand shock account for 19% and 12% of the long-run variability in real stock returns, respectively. As a robustness check, (domestic) economic policy uncertainty is shown to also significantly influence real stock returns in Europe and in energy-exporting Canada.
UR - http://handle.uws.edu.au:8081/1959.7/528444
U2 - 10.1016/j.intfin.2013.07.001
DO - 10.1016/j.intfin.2013.07.001
M3 - Article
SN - 1042-4431
VL - 26
SP - 305
EP - 318
JO - Journal of International Financial Markets , Institutions and Money
JF - Journal of International Financial Markets , Institutions and Money
ER -