Economic Policy Uncertainty and Bond Risk Premia

Ioannidis, Christos; Ka, Kook

doi:10.1111/jmcb.12748

Cited by 19 publications

(3 citation statements)

References 109 publications

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“…Second, from the perspective of shareholders, EPU increases investment risks, thus making future profitability more uncertain. Therefore, investors will require higher risk premiums (Ioannidis and Ka 2021 ) to increase the demand for D&O insurance. As the variance of future earnings under high uncertainty increases, investors pay closer attention to firm-specific information and monitor their firms’ behaviour more strictly, thus reducing the need for the governance role of D&O insurance.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Xie

Lin

2023

Geneva Pap Risk Insur Issues Pract

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This study investigates the effects of economic policy uncertainty (EPU) on corporate purchases of directors and officers liability insurance from the perspective of capital market pressures. Using data on A-share Chinese listed firms from 2010 to 2021, our theoretical analysis and empirical tests reveal that higher levels of EPU increase purchases. The theoretical analysis and mediating tests reveal that capital market pressures play a mediating role in the relationship between EPU and purchases. This study also finds that the indirect ways in which EPU increases purchases consider the need for firms to mitigate litigation risks and take advantage of insurance governance. The heterogeneous analysis and tests reveal that EPU increases purchases more significantly in firms that have higher managerial agency costs, have lower corporate transparency, and are in industries with higher competition. The findings are significant for improving the risk management system in China’s capital markets.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Xie

Lin

2023

Geneva Pap Risk Insur Issues Pract

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“…The countercyclical pattern of uncertainty is often attributed to a real options effect, although there is also evidence that uncertainty may raise risk premia, as in Ioannidis and Ka (2021), and increase risk aversion resulting in lower aggregate demand, as in Fernández-Villaverde et al (2015). Uncertainty related to oil prices has been particular prominent, given the role of oil prices in macroeconomic activity.…”

Section: Introductionmentioning

confidence: 99%

Uncertainty and investment: Evidence from domestic oil rigs

Dossani,

Elder

2023

Journal of Futures Markets

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We provide new evidence on the response of investment to uncertainty, using granular and high‐frequency (weekly) data on domestic oil drilling and oil prices since 2012, corresponding to the period of widespread horizontal drilling and hydraulic fracturing in the United States. Weekly data permits much weaker identifying restrictions than is required with monthly data that is common in the literature. We measure domestic drilling activity by the number of rigs drilling for oil, and we measure oil uncertainty by implied volatility from options on oil futures and the return on delta‐neutral straddles from options on oil futures. We show that the number of oil drilling rigs are tightly linked to both oil prices and oil uncertainty, and we find that oil uncertainty significantly decreases the number of drilling rigs, with a one standard deviation increase in uncertainty reducing the number of drilling rigs by up to 5%.

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“…Changes in existing economic policies, or even the speed of changes agreed in these policies, can influence investors, generating a sentiment of insecurity in their expectations or judgements about the value of assets (Alc azar-Blanco et al, 2021). The most recent literature confirms that EPU influences the asset pricing of many markets, including stocks (Antonakakis et al, 2013;Arouri et al, 2016), bonds (Ioannidis and Ka, 2021;Pham and Nguyen, 2022) and cryptocurrencies (Cheng and Yen, 2020;Paule-Vianez et al, 2020), among others.…”

Section: Introductionmentioning

confidence: 99%

The impact of economic policy uncertainty on stock types while considering the economic cycle. A quantile regression approach

Paule-Vianez,

Orden-Cruz,

Prado-Román

et al. 2023

EJMBE

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PurposeThis study aims to analyse the effects of Economic Policy Uncertainty (EPU) on the return of growth/value and small/large-cap stocks during expansionary and recessionary periods across a conditional distribution.Design/methodology/approachThe authors selected a sample covering the period between 01/1995–05/2021. Quantile regressions were applied to the EPU and Russell indices. Business cycles were established following the NBER.FindingsThe results show that EPU has a negative effect on stocks with the intensity of the effect depending on the stock's profile. Small-cap and growth stocks were found to be most sensitive to EPU, especially during recessions. The negative effect is moderated by the economic cycle but is progressively diluted at the lower tail of the stock return distribution.Practical implicationsThe findings shed more light on investment strategies for growth/value investors that pursue opportunities arising from a changing economic cycle.Originality/valueThis study makes the following contributions: (1) explores the impact of EPU on the return of different stocks across a conditional distribution, and (2) provides evidence on how the economic cycle influences EPU impact on growth/value stocks and small/large stocks.

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Economic Policy Uncertainty and Bond Risk Premia

Cited by 19 publications

References 109 publications

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Economic policy uncertainty and directors and officers liability insurance: a perspective on capital market pressures

Uncertainty and investment: Evidence from domestic oil rigs

The impact of economic policy uncertainty on stock types while considering the economic cycle. A quantile regression approach

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