Economic Policy Uncertainty and Stock Returns of Africa: A Wavelet Coherence Analysis

Asafo−Adjei, Emmanuel; Agyapong, Daniel; Agyei, Samuel Kwaku; Frimpong, Siaw; Djimatey, Reginald; Adam, Anokye M.

doi:10.1155/2020/8846507

Cited by 54 publications

(41 citation statements)

References 45 publications

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“…ese policy uncertainties have a significant impact on financial markets and a growing interest in the literature relating to the link between EPU and international financial markets, most especially the stock markets, which have led several researchers to focus on this area. us, studies by Brogaard and Detzel [37], Arouri et al [38], Bahmani-Oskooee and Saha [12], Adam [39], Asafo-Adjei et al [40], and Chiang [41] have demonstrated that heightened uncertainty hurts stock returns. Moreover, Pastor and Veronesi [42], Liu and Zhang [43], Tsai [44], and Jurado et al [19] with different research orientations focus on the impact of uncertainty on stock market volatility and find that the inclusion of EPU can enhance the predictability of stock returns.…”

Section: Literature Reviewmentioning

confidence: 99%

Economic Policy Uncertainty Linkages among Asian Countries: Evidence from Threshold Cointegration Approach

Osei

Djimatey

Adam

2021

Discrete Dynamics in Nature and Society

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This paper employs the threshold cointegration methodology to assess the long- and short-run dynamics of asymmetric adjustment between economic policy uncertainty (EPU) of China-India, China-Japan, China-Korea, India-Japan, India-Korea, and Japan-Korea pairs using monthly EPU data ranging from January 1997 to April 2020. The relationship between the EPU pairs is examined in terms of Engle-Granger and threshold cointegrations. The findings provide evidence of long-run threshold cointegration and that the adjustments towards the long-run equilibrium position are asymmetric in the short run for the China-India and India-Japan EPU pairs in M-TAR specification with nonzero threshold values. Also, the results suggest a unidirectional causal relationship between China-India, China-Japan, and India-Korea EPU pairs in the long and short run using the spectral frequency domain causality approach. However, a bidirectional causal relationship between China-Korea, India-Japan, and Japan-Korea pairs exists in the long and short run. Therefore, the findings provide some clues to economic policymakers within the Asian subregion for possible policy uncertainty synergies and spillovers among the Asian countries.

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Section: Literature Reviewmentioning

confidence: 99%

Economic Policy Uncertainty Linkages among Asian Countries: Evidence from Threshold Cointegration Approach

Osei

Djimatey

Adam

2021

Discrete Dynamics in Nature and Society

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“…e real wavelet has v � 1, and the complex wavelet v � 2. e variance of the corresponding variable is denoted by δ 2 x . Following Rua et al [44], we define the cross-wavelet transform of two commodities market series (X) and (Y) as follows:…”

Section: Continuous Wavelet Transform and Waveletmentioning

confidence: 99%

“…Specifically, the study provides new evidence by adjusting for the possible influence of EPU using partial wavelet coherence and wavelet coherence, which is lacking in the comovement of agricultural commodities in previous studies (see, for example,Živkov et al [7]; Amrouk et al [17]). e advantage of the use of wavelet-based methods is well documented in the literature (see [41][42][43][44]). is paper, therefore, investigates the partial correlations in the agricultural commodity prices by including (excluding) the influence of EPU.…”

Section: Introductionmentioning

confidence: 99%

Can Global Economic Policy Uncertainty Drive the Interdependence of Agricultural Commodity Prices? Evidence from Partial Wavelet Coherence Analysis

et al. 2021

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This paper employed wavelet coherence and partial wavelet coherence to investigate the time-frequency effect of global economic policy uncertainty on the comovement of five agricultural commodities such as maize, oat, rice, soybean, and wheat using monthly data from January 1997 to December 2019. In general, we observed heterogeneity in comovement structures of the agricultural commodities market at different time-frequency scales which are profound at high frequencies from the bivariate wavelet coherence. The partial wavelet coherence analysis shows that global economic policy uncertainty is a driver of agricultural commodity market connectedness. This implies that extreme changes in economic policy uncertainty have the tendency to influence commodity price comovement. This poses risk to the stability of the agricultural commodities market, which requires the policymaker’s intervention to protect against the spillover risk contagion effect in uncertain times.

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“…Exploring the nature and sources of the relationships has emerged as a promising area in academic research for decades. As a corollary to this, a burgeoning body of literature has examined the relationship between stocks and macroeconomic variables (see, Shi et al, 2021 ; Asafo-Adjei et al, 2020 ). Another strand of studies also explores the behaviours of macroeconomic variables to crude oil market volatilities (for example, see, Salisu et al, 2019 ; Balcilar et al, 2021 ; Ratti and Vespignani, 2016 ).…”

Section: Introductionmentioning

confidence: 99%

Modelling the heterogeneous relationship between the crude oil implied volatility index and African stocks in the coronavirus pandemic

2021

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This paper revisited the crude oil – stock market nexus to examine how the oil implied volatility index (a forward-looking and more accurate measure for uncertainty in oil prices) affects stock returns in major Africa's oil-importing (South Africa, Kenya, Mauritius, and Botswana) and oil-exporting (Nigeria, Egypt, Tunisia, and Morocco) countries during the COVID-19 pandemic. Quantile regression is employed to examine the heterogeneous relationship at different market conditions. The study documents evidence to support a negative relationship between the oil implied volatility shocks and stock returns in the selected stock markets, especially in downturns. Findings from this study also reveal that the oil implied volatility shocks can asymmetrically influence Africa's stocks. Specifically, our empirical evidence reveals that positive shocks in the oil implied volatility index play a key role in most of Africa's stock markets in market downturns while negative shocks play a moderate role during benign market conditions in some of Africa's stock markets during the pandemic. More importantly, our findings divulge that investors can find an invaluable shelter with a portfolio of the selected African stocks and oil market securities in the time of the pandemic. The policy implications are further discussed.

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Economic Policy Uncertainty and Stock Returns of Africa: A Wavelet Coherence Analysis

Cited by 54 publications

References 45 publications

Economic Policy Uncertainty Linkages among Asian Countries: Evidence from Threshold Cointegration Approach

Economic Policy Uncertainty Linkages among Asian Countries: Evidence from Threshold Cointegration Approach

Can Global Economic Policy Uncertainty Drive the Interdependence of Agricultural Commodity Prices? Evidence from Partial Wavelet Coherence Analysis

Modelling the heterogeneous relationship between the crude oil implied volatility index and African stocks in the coronavirus pandemic

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