Preventing crash in stock market: The role of economic policy uncertainty during COVID-19

This paper investigates the impact of economic policy uncertainty (EPU) on the crash risk of US stock market during the COVID-19 pandemic. To this end, we use the GARCH-S (GARCH with skewness) model to estimate daily skewness as a proxy for the stock market crash risk. The empirical results show the significantly negative correlation between EPU and stock market crash risk, indicating the aggravation of EPU increase the crash risk. Moreover, the negative correlation gets stronger after the global COVID-19 outbreak, which shows the crash risk of the US stock market will be more affected by EPU during the epidemic.

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Year of publication:	2021
Authors:	Dai, Peng-Fei ; Xiong, Xiong ; Liu, Zhifeng ; Sun, Jianjun
Published in:	Financial Innovation. - Heidelberg : Springer, ISSN 2199-4730. - Vol. 7.2021, 1, p. 1-15
Publisher:	Heidelberg : Springer
Subject:	COVID-19 \| Crash risk \| Economic policy uncertainty \| Skewness

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.1186/s40854-021-00248-y [DOI] 1757585451 [GVK] hdl:10419/237262 [Handle]
Classification:	D80 - Information and Uncertainty. General ; E60 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook. General ; G10 - General Financial Markets. General ; G32 - Financing Policy; Capital and Ownership Structure
Source:	EconStor

Persistent link: https://www.econbiz.de/10012602912