Category-specific EPU indices, macroeconomic variables and stock market return predictability
International Review of Financial Analysis
; 84, 2022.
Article
in English
| Web of Science | ID: covidwho-2069188
ABSTRACT
This paper mainly investigates whether the category-specific EPU indices have predictability for stock market returns. Empirical results show that the content of category-specific EPU can significantly predict the stock market return, no matter the individual category-specific EPU index or the principal component of category -specific EPU indices. In addition, the information of category-specific EPU indices can also have higher eco-nomic gains than traditional macroeconomic variables, even considering the trading cost and different investor risk aversion coefficients. During different forecasting windows, multi-period forecast horizons and the COVID-19 pandemic, we find the information contained in category-specific EPU indices can have better performances than that of the macroeconomic variables. Our paper tries to provide new evidence for stock market returns based on category-specific EPU indices.
Full text:
Available
Collection:
Databases of international organizations
Database:
Web of Science
Type of study:
Prognostic study
Language:
English
Journal:
International Review of Financial Analysis
Year:
2022
Document Type:
Article
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