The macro and asset pricing implications of rising Italian uncertainty: Evidence from a novel news-based macroeconomic policy uncertainty index

Abstract

We develop a new monthly and daily index of economic policy uncertainty for Italy based on articles from the Sole 24 Ore (a popular Italian business daily newspaper). VAR investigations document that an unexpected rise in the Sole 24 Ore news-based EPU index (EPU24) has mild effects on the real economic activity. Cross-sectional asset pricing tests then show that both monthly and daily EPU24 shocks command a positive risk premium. A standard event study finally indicates the presence of statistically significant positive cumulative abnormal returns (CARs) in the energy sector following different categories of policy-related events. Negative and significant CARs in the financial sector are instead found to be generated by international-related events and political elections.

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“…Penelitian mengenai pengaruh peristiwa ekonomi mikro yang dilakukan oleh Muna & Khaddafi (2022) dan Madani et al (2020) mengenai peristiwa stock split, Chhatwal & Lamba (2017) dan Christianto & Purbawangsa (2022) mengenai peristiwa right issue, serta penelitian oleh Syed & Bajwa (2018) mengenai pengumuman laba menunjukkan adanya reaksi pasar. Penelitian mengenai pengaruh peristiwa ekonomi makro yang dilakukan oleh Widyasari et al (2018) mengenai kebijakan amnesti pajak, Handayani et al, (2020) mengenai peraturan pemerintah PJOK 11 tahun 2020, dan Donadelli et al (2020) mengenai kebijakan ekonomi makro juga menunjukkan bahwa adanya reaksi pasar yang terjadi terhadap peristiwa tersebut.…”

Dividend signaling or dividend smoothing? New empirical evidence from the italian insurance industry after the global financial crisis

“…Most importantly, Donadelli et al. ( 2020 ) have shown that rising political uncertainty has had clear implications for Italian asset prices in 2012 and onwards reporting empirical evidence based on a macroeconomic policy uncertainty index constructed using newspaper articles. In this difficult situation economic policy makers in Rome faced big challenges.…”

Measuring Economic Uncertainty in China

“…Motived by the theoretical study of Pástor and Veronesi (2012), and empirical work from (Brogaard and Detzel, 2015;Bali et al, 2017;Phan et al, 2018;Hillier and Loncan, 2019;Donadelli et al, 2020), it is worth to investigate how EU affects asset pricing. 33 First, we follow Brogaard and Detzel (2015) and to test whether our EU affects stock returns instantaneously by the equation:…”