Abstract
ABSTRACT This paper utilizes a structural VAR model to investigate the asymmetric responses of aggregate earnings and stock market returns to oil price shocks and economic policy uncertainty. It finds that aggregate earnings contain information about oil price fluctuations. The effects of oil shocks on the earnings and returns are amplified by endogenous policy uncertainty responses. Oil shocks and policy uncertainty explain 29.7% and 11.2% of the variation in the aggregate earnings in the long run. The covariance of aggregate earnings and stock market returns is negative and driven by the demand-side oil shock and news coverage/CPI forecast uncertainty.
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