Dynamic Co-Movements of Stock Market Returns, Implied Volatility and Policy Uncertainty

We examine time-varying correlations among stock market returns, implied volatility and policy uncertainty. Our findings suggest that correlations are indeed time-varying and sensitive to oil demand shocks and US recessions.

[1]  J. Aizenman,et al.  Policy Uncertainty, Persistence and Growth , 1991 .

[2]  R. Engle.  Dynamic Conditional Correlation , 2002 .

[3]  N. Bloom.  The Impact of Uncertainty Shocks , 2007 .

[4]  N. Antonakakis.  Business cycle synchronization during US recessions since the beginning of the 1870s , 2012 .

[5]  D. Romer.  Rational Asset Price Movements Without News , 1992 .

[6]  D. Andrews,et al.  Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis , 1992 .

[7]  L. Kilian.  Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market , 2006 .

[8]  Alfred A. Marcus,et al.  Policy Uncertainty and Technological Innovation , 1981 .

[9]  In Ho Lee.  Market Crashes and Informational Avalanches , 1998 .

[10]  Stijn Claessens,et al.  The Global Financial Crisis: How Similar? How Different? How Costly? , 2010 .

[11]  Eric Olson,et al.  The time-varying correlation between uncertainty, output, and inflation: Evidence from a DCC-GARCH model , 2013 .

[12]  S. Davis,et al.  Measuring Economic Policy Uncertainty , 2013 .

[13]  Dani Rodrik,et al.  Policy Uncertainty and Private Investment in Developing Countries , 1989 .

[14]  Christopher F. Baum,et al.  'On the Sensitivity of Firms' Investment to Cash Flow and Uncertainty' , 2010 .

[15]  Andrew Caplin,et al.  Business as Usual, Market Crashes, and Wisdom after the Fact , 1994 .

[16]  Ruediger Bachmann,et al.  Uncertainty and Economic Activity: Evidence from Business Survey Data , 2010 .

[17]  Joseph Zeira.  Informational overshooting, booms, and crashes , 1999 .

[18]  J. Stein,et al.  Differences of Opinion, Short-Sales Constraints, and Market Crashes , 2003 .