Does Economic Policy Uncertainty Depress Stock Returns? Evidence from a Quantile Impulse Response Perspective

This paper investigates the relationship between economic policy uncertainty shocks and stock returns using a quantile impulse response approach, which can captures the asymmetric effects that conventional impulse response does not explain. We find little evidence in support of a general consensus that the economic policy uncertainty consistently depresses stock returns in different stock market conditions, and thus it could improve stock returns in bearish market condition. Our finding shed new light on the economic policy uncertainty-stock returns nexus.