Investigation of the effect of global EPU spillovers on country-level stock market idiosyncratic volatility

References

• Ahir, H., N. Bloom, and D. Furceri. 2022. The World Uncertainty Index. NBER Working Paper No. w29763, Available at SSRN: https://ssrn.com/abstract=4039482.
   Google Scholar
• Al-Thaqeb, S. A., and B. G. Algharabali. 2019. “Economic Policy Uncertainty: A Literature Review.” Journal of Economic Asymmetries 20 (C). https://www.sciencedirect.com/science/article/abs/pii/S1703494919300726.
   Google Scholar
• Ang, A., R. J. Hodrick, Y. Xing, and X. Zhang. 2006. “The Cross Section of Volatility and Expected Returns.” Journal of Finance 51 (1): 259–299. https://doi.org/10.1111/j.1540-6261.2006.00836.x.
   Google Scholar
• Ang, A., R. J. Hodrick, Y. Xing, and X. Zhang. 2009. “High Idiosyncratic Volatility and Low Returns: International and Further US Evidence.” Journal of Financial Economics 91 (1): 1–23. https://doi.org/10.1016/j.jfineco.2007.12.005
   Web of Science ®Google Scholar
• Antonakakis, N., D. Gabauer, R. Gupta, and V. Plakandaras. 2018. “Dynamic Connectedness of Uncertainty Across Developed Economies: A Time-Varying Approach.” Economics Letters 166 (C): 63–75. https://doi.org/10.1016/j.econlet.2018.02.011.
   Google Scholar
• Baker, S., N. Bloom, and S. Davis. 2016. “Measuring Economic Policy Uncertainty.” Quarterly Journal of Economics 131 (4): 1593–1636. https://doi.org/10.1093/qje/qjw024.
   Web of Science ®Google Scholar
• Balcilar, M., R. Gupta, W. Kim, and C. Kyei. 2019. “The Role of Economic Policy Uncertainties in Predicting Stock Returns and Their Volatility for Hong Kong, Malaysia and South Korea.” International Review of Economics & Finance 59 (C): 150–163. https://doi.org/10.1016/j.iref.2018.08.016.
   Google Scholar
• Bali, T. G., and N. Cakici. 2004. “Value at Risk and Expected Stock Returns.” Financial Analysts Journal 60 (2): 57–73. https://doi.org/10.2469/faj.v60.n2.2610.
   Web of Science ®Google Scholar
• Bali, T. G., and N. Cakici. 2008. “Idiosyncratic Volatility and the Cross-Section of Expected Returns.” Journal of Financial and Quantitative Analysis 43 (1): 29–58. https://doi.org/10.1017/S002210900000274X.
   Web of Science ®Google Scholar
• Bali, T. G., and N. Cakici. 2010. “World Market Risk, Country-Specific Risk and Expected Returns in International Stock Markets.” Journal of Banking and Finance 34 (6): 1152–1165. https://doi.org/10.1016/j.jbankfin.2009.11.012.
   Web of Science ®Google Scholar
• Balli, F., G. Uddin, H. Mudassar, and S. Yoon. 2017. “Cross-country Determinants of Economic Policy Uncertainty Spillovers.” Economics Letters 156 (C): 179–183. https://doi.org/10.1016/j.econlet.2017.05.016.
   Google Scholar
• Bekaert, G., E. Engstrom, and Y. Xing. 2009. “Risk, Uncertainty, and Asset Prices.” Journal of Financial Economics 91 (1): 59–82. https://doi.org/10.1016/j.jfineco.2008.01.005.
   Web of Science ®Google Scholar
• Bekaert, G., and C. R. Harvey. 1997. “Emerging Equity Market Volatility.” Journal of Financial Economics 43 (1): 29–77. https://doi.org/10.1016/S0304-405X(96)00889-6.
   Web of Science ®Google Scholar
• Bekaert, G., R. Hodrick, and X. Zhang. 2012. “Aggregate Idiosyncratic Volatility.” Journal of Financial and Quantitative Analysis 47 (6): 1155–1185. https://doi.org/10.1017/S0022109012000543.
   Web of Science ®Google Scholar
• Bekaert, G., M. Hoerova, and N. R. Xu. 2021. Risk, Monetary Policy and Asset Prices in a Global World. Available at SSRN 3599583. https://doi.org/10.2139/ssrn.3599583.
   Google Scholar
• Biljanovska, N., F. Grigoli, and M. Hengge. 2021. “Fear thy Neighbor: Spillovers from Economic Policy Uncertainty.” Review of International Economics 29 (2): 409–438. https://doi.org/10.1111/roie.12531.
   Web of Science ®Google Scholar
• Bollerslev, T., R. Engle, and J. Wooldridge. 1988. “A Capital Asset Pricing Model with Time Varying Covariances.” Journal of Political Economy 96 (1): 116–131. https://doi.org/10.1086/261527.
   Web of Science ®Google Scholar
• Brandt, M. W., A. Brav, J. Graham, and A. Kumar. 2010. “The Idiosyncratic Volatility Puzzle: Time Trend or Speculative Episodes?” Review of Financial Studies 23 (2): 863–899. https://doi.org/10.1093/rfs/hhp087.
   Web of Science ®Google Scholar
• Caglayan, M., W. Xue, and L. Zhang. 2020. “Global Investigation on Country-Level Idiosyncratic Volatility and its Determinants.” Journal of Empirical Finance 55 (C): 143–160. https://doi.org/10.1016/j.jempfin.2019.11.006.
   Google Scholar
• Claessens, S., S. Dasgupta, and J. Glen. 1995. “Return Behavior in Emerging Stock Markets.” World Bank Economic Review 9 (1): 131–151. https://doi.org/10.1093/wber/9.1.131.
   Web of Science ®Google Scholar
• Colombo, V. 2013. “Economic Policy Uncertainty in the US: Does it Matter for the Euro Area?” Economics Letters 121 (1): 39–42. https://doi.org/10.1016/j.econlet.2013.06.024.
   Web of Science ®Google Scholar
• Corradi, V., W. Distaso, and A. Mele. 2013. “Macroeconomic Determinants of Stock Volatility and Volatility Premiums.” Journal of Monetary Economics 60 (2): 203–220. https://doi.org/10.1016/j.jmoneco.2012.10.019.
   Web of Science ®Google Scholar
• Davidson, R. 2012. “Statistical Inference in the Presence of Heavy Tails.” Econometrics Journal 15 (1): 31–53. https://doi.org/10.1111/j.1368-423X.2010.00340.x.
   Web of Science ®Google Scholar
• Diamonte, R. L., J. M. Liew, and R. L. Stevens. 1998. “Political Risk in Emerging and Developed Markets.” Financial Analysts Journal 52 (3): 71–76. https://doi.org/10.2469/faj.v52.n3.1998.
   Google Scholar
• Diebold, F. X., and K. Yilmaz. 2012. “Better to Give Than to Receive: Predictive Directional Measurement of Volatility Spillovers.” International Journal of Forecasting 28 (1): 57–66. https://doi.org/10.1016/j.ijforecast.2011.02.006.
   Web of Science ®Google Scholar
• Drechsler, I. 2013. “Uncertainty, Time-Varying Fear, and Asset Prices.” Journal of Finance 68 (5): 1843–1889. https://doi.org/10.1111/jofi.12068.
   Web of Science ®Google Scholar
• Engle, R., and G. J. Rangel. 2008. “The Spline-GARCH Model for Low Frequency Volatility and its Global Macroeconomic Causes.” Review of Financial Studies 21 (3): 1187–1222. https://doi.org/10.1093/rfs/hhn004.
   Web of Science ®Google Scholar
• Erb, C. B., C. R. Harvey, and T. E. Viskanta. 1996. “Political Risk, Economic Risk, and Financial Risk.” Financial Analysts Journal 52 (6): 29–46. https://doi.org/10.2469/faj.v52.n6.2038.
   Google Scholar
• Fama, E. F., and K. R. French. 1993. “Common Risk Factors in the Returns on Stocks and Bonds.” Journal of Financial Economics 33 (1): 3–56. https://doi.org/10.1016/0304-405X(93)90023-5.
   Web of Science ®Google Scholar
• Fama, E. F., and K. R. French. 2012. “Size, Value, and Momentum in International Stock Returns.” Journal of Financial Economics 105 (3): 457–452. https://doi.org/10.1016/j.jfineco.2012.05.011.
   Web of Science ®Google Scholar
• Fama, E. F., and K. R. French. 2017. “International Tests of a Five-Factor Asset Pricing Model.” Journal of Financial Economics 123 (3): 441–463. https://doi.org/10.1016/j.jfineco.2016.11.004.
   Web of Science ®Google Scholar
• Fontaine, I., R. Justinien, and L. Didier. 2018. “Chinese Policy Uncertainty Shocks and the World Macroeconomy: Evidence from STVAR.” China Economic Review 51 (C): 1–19. https://doi.org/10.1016/j.chieco.2018.04.008.
   Google Scholar
• Gabauer, D., and R. Gupta. 2018. “On the Transmission Mechanism of Country-Specific and International Economic Uncertainty Spillovers: Evidence from a TVP-VAR Connectedness Decomposition Approach.” Economics Letters 171 (C): 63–71. https://doi.org/10.1016/j.econlet.2018.07.007.
   Google Scholar
• Guo, H., H. Kassa, and M. F. Ferguson. 2014. “On the Relation between EGARCH Idiosyncratic Volatility and Expected Stock Returns.” Journal of Financial and Quantitative Analysis 29 (1): 271–296. https://doi.org/10.1017/S0022109014000027.
   Google Scholar
• Gupta, R., and X. Sun. 2020. “Forecasting Economic Policy Uncertainty of BRIC Countries Using Bayesian VARs.” Economics Letters 186 (C). https://doi.org/10.1016/j.econlet.2019.108677.
   Google Scholar
• Harvey, C. R. 1995. “Predictable Risk and Returns in Emerging Markets.” Review of Financial Studies 8 (3): 773–816. https://doi.org/10.1093/rfs/8.3.773.
   Web of Science ®Google Scholar
• He, F., Z. Wang, and L. Yin. 2020. “Asymmetric Volatility Spillovers between International Economic Policy Uncertainty and the U.S. Stock Market.” North American Journal of Economics and Finance 51 (C). https://www.sciencedirect.com/science/article/abs/pii/S1062940819303055.
   Google Scholar
• Hollstein, F. 2022. “Local, Regional, or Global Asset Pricing?” Journal of Financial and Quantitative Analysis 57 (1): 291–320. https://doi.org/10.1017/S0022109021000028.
   Web of Science ®Google Scholar
• Hueng, C. J., and R. Yau. 2013. “Country-specific Idiosyncratic Risk and Global Equity Index Returns.” International Review of Economics and Finance 25 (C): 326–337. https://doi.org/10.1016/j.iref.2012.07.014.
   Google Scholar
• Huidrom, R., M. A. Kose, and F. L. Ohnsorge. 2020. “How Important are Spillovers from Major Emerging Markets?” International Finance 23 (1): 47–63. https://doi.org/10.1111/infi.12350.
   Web of Science ®Google Scholar
• Klößner, S., and R. Sekkel. 2014. “International Spillovers of Policy Uncertainty.” Economics Letters 124 (3): 508–512. https://doi.org/10.1016/j.econlet.2014.07.015.
   Web of Science ®Google Scholar
• Koenker, R., and G. Bassett. 1978. “Regression Quantiles.” Econometrica 46 (1): 33–50. https://doi.org/10.2307/1913643.
   Web of Science ®Google Scholar
• Liu, L., and T. Zhang. 2015. “Economic Policy Uncertainty and Stock Market Volatility.” Finance Research Letters 15 (C): 99–105. https://doi.org/10.1016/j.frl.2015.08.009.
   Google Scholar
• Ludvigson, S. C., S. Mai, and S. Ng. 2021. “Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?” American Economic Journal: Macroeconomics 13 (4): 369–410. https://doi.org/10.1257/mac.20190171.
   Web of Science ®Google Scholar
• Ma, Y., Z. Wang, and F. He. 2020. “How do Economic Policy Uncertainties Affect Stock Market Volatility? Evidence from G7 Countries.” International Journal of Finance & Economics 27 (2): 1–23.
   Web of Science ®Google Scholar
• Medovikov, I. 2016. “When Does the Stock Market Listen to Economic News? New Evidence from Copulas and News Wires.” Journal of Banking & Finance 65 (C): 27–40. https://doi.org/10.1016/j.jbankfin.2016.01.004.
   Google Scholar
• Mumtaz, H., and K. Theodoridis. 2015. “The International Transmission of Volatility Shocks: An Empirical Analysis.” Journal of the European Economic Association 13 (3): 512–533. https://doi.org/10.1111/jeea.12120.
   Web of Science ®Google Scholar
• Pastor, L., and P. Veronesi. 2012. “Uncertainty About Government Policy and Stock Prices.” Journal of Finance 67 (4): 1219–1264. https://doi.org/10.1111/j.1540-6261.2012.01746.x.
   Web of Science ®Google Scholar
• Phan, D., S. Sharma, and V. Tran. 2018. “Can Economic Policy Uncertainty Predict Stock Returns? Global Evidence.” Journal of International Financial Markets, Institutions and Money 55 (C): 134–150. https://doi.org/10.1016/j.intfin.2018.04.004.
   Web of Science ®Google Scholar
• Solnik, B. 1993. “The Performance of International Asset Allocation Strategies Using Conditional Information.” Journal of Empirical Finance 1 (1): 33–55. https://doi.org/10.1016/0927-5398(93)90004-B.
   Google Scholar
• Su, Z., T. Fang, and L. Yin. 2019. “Understanding Stock Market Volatility: What is the Role of U.S.” Uncertainty? North American Journal of Economics and Finance 48 (C): 582–590. https://doi.org/10.1016/j.najef.2018.07.014.
   Google Scholar
• Trung, N. B. 2018. “The Spillover Effects of US Economic Policy Uncertainty on the Global Economy: A Global VAR Approach.” North American Journal of Economics and Finance 48 (C): 90–110.
   Google Scholar
• Westerlund, J., and P. Narayan. 2015. “Testing for Predictability in Conditionally Heteroskedastic Stock Returns.” Journal of Financial Econometrics 13 (2): 342–375. https://doi.org/10.1093/jjfinec/nbu001.
   Web of Science ®Google Scholar
• White, H., T. Kim, and S. Manganelli. 2015. “VAR for VaR: Measuring Tail Dependence Using Multivariate Regression Quantiles.” Journal of Econometrics 187 (1): 169–188. https://doi.org/10.1016/j.jeconom.2015.02.004.
   Web of Science ®Google Scholar