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Economic Policy Uncertainty and Stock Return Momentum
Garima Goel, , Mário Nuno Mata, António Bento Caleiro, João Xavier Rita, José António Filipe
Published in
2021
Volume: 14
   
Issue: 4
Abstract
This paper investigates the relationship between economic policy uncertainty (EPU), an index capturing newspaper coverage of policy-related issues and momentum profits. Momentum remains an unexplained anomaly. Our findings reveal a statistically negative association between EPU and hedge momentum portfolios. The short side portfolio dominates this effect as compared to the long side. EPU is statistically significant after controlling for macroeconomic variables. Furthermore, the paper conducts a battery of time series analysis, which highlights that EPU has a causal relationship with the hedge portfolio in the short run. On the other hand, the hedge portfolio has a long-term relationship with EPU, not the other way around.
About the journal
JournalJournal of Risk and Financial Management
ISSN1911-8074
Open AccessFalse