The Asset-Pricing Implications of Government Economic Policy Uncertainty

  title={The Asset-Pricing Implications of Government Economic Policy Uncertainty},
  author={Jonathan Brogaard and Andrew Detzel},
  journal={Manag. Sci.},
Using the news-based measure of Baker et al. [Baker SR, Bloom N, Davis SJ 2013 Measuring economic policy uncertainty. Working paper, Stanford University, Stanford, CA] to capture economic policy uncertainty EPU in the United States, we find that EPU positively forecasts log excess market returns. An increase of one standard deviation in EPU is associated with a 1.5% increase in forecasted three-month abnormal returns 6.1% annualized. Furthermore, innovations in EPU earn a significant negative… 

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