Asymmetric effects of economic policy uncertainty on stock returns under different market conditions: evidence from G7 stock markets

Abstract

ABSTRACT This article applies quantile regression approaches to investigate the asymmetric effects of economic policy uncertainty (EPU) on G7 stock returns by dividing EPU changes into EPU increases and EPU decreases. We observe that EPU increases have greater impacts on G7 stock returns than EPU decreases, which confirms that asymmetric effects do exist. Furthermore, our results show that EPU changes have asymmetric impacts on Japan, Canada, the UK, and the US stock returns in the bearish market but not in the bullish market. In addition, there are no asymmetric effects of EPU changes on Germany stock returns.