Title: Foreign economic policy uncertainty and the U.S. equity returns
Authors: Mohammad Jahan-Parvar - Federal Reserve Baord of Governors (United States) [presenting]
Yuriy Kitsul - Federal Reserve Board (United States)
Beth Anne Wilson - Federal Reserve Board (United States)
Jamil Rahman - Yale University (United States)
Abstract: The predictive ability and economic significance of foreign economic policy uncertainty for U.S. equity returns are documented. After orthogonalizing global economic policy uncertainty (foreign EPU) with respect to the U.S. EPU, we find that it has significant predictive power for aggregate stock returns and returns of portfolios constructed on size, investment, capital expenditure, and foreign sales in 6 to 12-months ahead horizons. We additionally show that foreign EPU commands an economically significant and negative-valued premium in the cross-section of returns.