Economic policy uncertainty,oil price volatility and stock market returns: Evidence from a nonlinear model |
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| Affiliation: | 1. School of Management Engineering, Nanjing University of Information Science & Technology, Nanjing 210044, China;2. China Institute of Manufacturing Development, Nanjing University of Information Science & Technology, Nanjing 210044, China;3. School of Statistics and Mathematics, Zhejiang Gongshang University, Hangzhou, Zhejiang 310018, China;4. Collaborative Innovation Center for Statistical Data Engineering Technology and Application, Zhejiang Gongshang University, Hangzhou 310018, China;1. School of Materials Science and Engineering, Northeastern University, Shenyang, Liaoning 110819, China;2. School of Applied Finance and Behavioral Science, Dongbei University of Finance and Economics, No.217, Jian Shan Street, Sha Hekou District, Dalian, Liaoning 116025, China;3. School of Business Administration, Northeastern University, No.195, Innovation Road, Hunnan New District, Shenyang, Liaoning 110169, China;4. School of Business Administration, Northeastern University, No.195, Innovation Road, Hunnan New District, Shenyang, Liaoning 110169, China;1. School of Finance, Nanjing Audit University, Nanjing, China;2. School of Public Administration, Hunan University, China;3. Research Institute of Digital Society and Blockchain, Hunan University, China;4. Centre for Resource and Environmental Management, Hunan University, China;5. The Energy Centre, University of Auckland, New Zealand;6. Independent Researcher, Melbourne, Australia;7. Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, China;8. Research Center of Peaking Carbon Emissions and Carbon Neutrality, Hunan University, China;9. Business School, Hunan University, China |
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| Abstract: | This paper investigates the nonlinear relationship between economic policy uncertainty, oil price volatility and stock market returns for 25 countries by applying the panel smooth transition regression model. We find that oil price volatility has a negative effect on stock returns, and this effect increases with economic policy uncertainty. Furthermore, there is pronounced heterogeneity in responses. First, oil-exporting countries whose economies depend more on oil prices respond more strongly to oil price volatility than oil-importing countries. Second, stock returns of developing countries are more susceptible to oil price volatility than that of developed countries. Third, crisis plays a crucial role in the relation between oil price volatility and stock returns. |
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| Keywords: | Economic policy uncertainty Oil price volatility Stock market returns PSTR model |
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