Examining the Asymmetric Relationship Between Selected Risk and Uncertainty Indices and Sectoral Stock Returns: An Empirical Analysis for OECD Countries

Year 2024, Volume: 9 Issue: 2, 236 - 261

Fahrettin Pala

Abstract

The purpose of this study is to investigate the asymmetric effects of economic policy uncertainty (EPU), geopolitical risk (GPR), and market sentiment (VIX) on sectoral stock returns in five selected OECD countries (USA, France, UK, Italy, and Sweden). The research design and methodological approach are based on the parametric Granger causality test and non-parametric quantile-based techniques. We use monthly data covering the Geopolitical Risk Index (GPR), the Economic Policy Uncertainty (EPU) for each country, and the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), as well as seven sectors of economic activity (healthcare, finance, technology, oil and gas, industrial, consumer services, and consumer staples. Our dataset covers the period from January 2012 to February 2024. Granger Causality test and Panel Quantile Regression analysis were used in the analysis of the data. Our findings consist of five main points. Firstly, we conclude that there is a causality relationship from economic policy uncertainty, geopolitical risk, and investor sentiment to sectoral stock returns of selected OECD countries. Secondly, we find that economic policy uncertainty, geopolitical risk, and investor sentiment generally have strong predictive power on the stock returns of selected OECD countries across different quantiles. Thirdly, we conclude that economic policy uncertainty (EPU) has the highest predictive power on stock returns among the selected OECD countries. Fourthly, we find that the effect of economic policy uncertainty on sectoral stock returns of selected OECD countries is asymmetric. Additionally, we conclude that geopolitical risk and market sentiment have asymmetric effects on the stock returns of specific sectors (technology, oil and gas). The originality of this study lies in its examination of how global factors, including COVID-19, the Russia-Ukraine conflict, and the Israel-Palestine conflict, impact sectoral stock markets in selected OECD countries. Thus, the value of our findings lies in providing significant implications for market regulation and portfolio management.

Keywords

Geopolitical Risk, Economic Policy Uncertainty, Investor Sentiment, Stock Market, Panel Quantile Regression

Seçili Risk Ve Belirsizlik Endeksleri İle Sektörel Hisse Senedi Getirileri Arasındaki Asimetrik İlişkinin İncelenmesi: OECD Ülkeleri İçin Ampirik Bir Analiz

Abstract

Çalışmanın amacı, ekonomik politika belirsizliği (EPU), jeopolitik risk (GPR) ve piyasa duyarlılığının (VIX) seçilmiş 5 OECD ülkesine (ABD, Fransa, İngiltere, İtalya ve İsveç) ait sektörel hisse senetleri üzerindeki asimetrik etkilerini araştırmaktır. Araştırmanın tasarımı ve metodolojik yaklaşımı parametrik Granger nedensellik testi ve parametrik olmayan kantil tabanlı tekniklere dayanmaktadır. Jeopolitik risk endeksi (GPR), ülke ekonomik politika belirsizliği (EPU) ve Chicago Board Options Exchange'in (CBOE) oynaklık endeksinin (VIX) yanı sıra ekonomik faaliyetin yedi sektörünü (sağlık, finans, teknoloji petrol ve gaz, endüstri, tüketici hizmetleri ve temel tüketim ürünleri) kapsayan aylık verilerini kullanıyoruz. Veri setimiz, Ocak 2012 ile Şubat 2024 tarihleri arasındaki dönemi kapsamaktadır. Verilerin analizinde Granger Nedensellik testi ve Panel Kantil Regresyon analizinden yararlanılmıştır. Bulgularımız beş ana noktandan oluşmaktadır. Bunlardan birincisi, ekonomik politika belirsizliği, jeopolitik risk ve yatırımcı duyarlılığından seçili OECD ülkelerinin sektörel hisse senetlerine doğru nedensellik ilişkisinin olduğu sonucuna varıyoruz. İkincisi ekonomik politika belirsizliği, jeopolitik risk ve yatırımcı duyarlılığının farklı çeyreklikler boyunca seçili OECD ülkelerine ait hisse senedi getirileri üzerinde genel olarak güçlü bir ön görü gücüne sahip olduğu sonucuna varıyoruz. Üçüncüsü seçilmiş OECD ülkelerine ait hisse senedi getirileri üzerinde en yüksek öngörü gücüne sahip değişkenin ekonomik politika belirsizliği (EPU) olduğu sonucuna varıyoruz. Dördüncüsü, özellikle ekonomik politika belirsizliğinin, seçili OECD ülkelerine ait sektörel hisse senedi getirileri üzerindeki etkisinin asimetrik olduğu sonucuna varıyoruz. Yine jeopolitik risk ve piyasa duyarlılığının ise belirli sektörel hisse senedi (teknoloji, petrol ve gaz) getirileri üzerindeki etkisinin asimetrik olduğu sonucuna varıyoruz. Çalışmanın orijinalliği, COVID-19, Rusya-Ukrayna ve İsrail-Filistin çatışmasının da dahil olduğu dünyada yaşanan küresel faktörlerin seçilmiş OECD ülkelerine ait sektörel bazda hisse senedi piyasasını nasıl etkilediğini ortaya koyuyor olmasıdır. Dolayısıyla bulgularımızın değeri, piyasa düzenlemesi ve portföy yönetimi için önemli çıkarımlar sağlamasında yatmaktadır.

Keywords

: Jeopolitik Risk, Ekonomik Politika Belirsizliği, Yatırımcı Duyarlılığı, Hisse Senedi Piyasası, Panel Kantil Regresyon

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