On economic uncertainty, stock market predictability and nonlinear spillover effects

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dc.contributor.author Bekiros, Stelios
dc.contributor.author Gupta, Rangan
dc.contributor.author Kyei, Clement
dc.date.accessioned 2016-03-15T11:16:49Z
dc.date.issued 2016-04
dc.description.abstract This paper uses a k-th order nonparametric Granger causality test to analyze whether firmlevel, economic policy and macroeconomic uncertainty indicators predict movements in real stock returns and their volatility. Linear Granger causality tests show that whilst economic policy and macroeconomic uncertainty indices can predict stock returns, firm-level uncertainty measures possess no predictability. However, given the existence of structural breaks and inherent nonlinearities in the series, we employ a nonparametric causality methodology, since the linear model is misspecified and the results emanating from it cannot be considered reliable. The nonparametric test reveals that, in fact, there is in general no predictability from the various measures of uncertainties, i.e., firm-level, macroeconomic, and economic policy uncertainty, for real stock returns. In turn, the predictability is concentrated in the volatility of real stock returns, except under the case of firm-level uncertainty. Thus, our results not only emphasize the role of economic and firm-level uncertainty measures in predicting volatility of stock returns, but also presage against using linear models which are likely to suffer from misspecification in the presence of parameter instability and nonlinear spillover effects. en_ZA
dc.description.embargo 2017-04-30
dc.description.librarian hb2015 en_ZA
dc.description.uri http://www.journals.elsevier.com/the-north-american-journal-of-economics-and-finance en_ZA
dc.identifier.citation Bekiros, S, Gupta, R & Kyei, C 2016, 'On economic uncertainty, stock market predictability and nonlinear spillover effects', North American Journal of Economics and Finance, vol. 36, pp. 184-191. en_ZA
dc.identifier.issn 1062-9408 (print)
dc.identifier.issn 1879-0860 (online)
dc.identifier.other 10.1016/j.najef.2016.01.003
dc.identifier.uri http://hdl.handle.net/2263/51880
dc.language.iso en en_ZA
dc.publisher Elsevier en_ZA
dc.rights © 2016 Elsevier Inc. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in North American Journal of Economics and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in North American Journal of Economics and Finance, vol. 36, pp. 184-191, 2016. doi : 10.1016/j.najef.2016.01.003. en_ZA
dc.subject Economic policy en_ZA
dc.subject Stock markets en_ZA
dc.subject Nonlinear causality en_ZA
dc.title On economic uncertainty, stock market predictability and nonlinear spillover effects en_ZA
dc.type Postprint Article en_ZA


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