Can economic policy uncertainty, oil prices, and investor sentiment predict Islamic stock returns? A multi-scale perspective

Purpose This paper aims to explore the impact of investor sentiments on economic policy uncertainty (EPU). The analysis also considers the momentum effect, stock market returns volatility and equity pricing inefficiencies across markets, which, to the best of the authors’ knowledge, has not been addressed in the literature. The role of these control variables has collectively been considered to have important behavioral implications for international investors Design/methodology/approach Quantile regressions are used for estimation purpose, as it provides robust and more efficient estimates rather than those coming from the traditional regression model. Findings The momentum effect is negative and significant only at higher quantiles, while oil prices are positive and significant across all quantiles. The exchange rate exerts a negative and significant effect on EPU, whereas equity price volatility (i.e. investor sentiment) exerts a negative and significant impact on EPU in most of the quantiles. Research limitations/implications The results have important implications for international investors and policymakers, especially in terms of the breakdown of economic policy uncertainty across different sample markets. The breakdown of complete sample period into sub-samples acts as a robust analysis and documents the similarity of the results for the Asian and developed markets cases, but not in the case of the European markets. Practical implications The findings imply the importance of financial stability that impacts the accumulation of systemic risks and adds smoothness to the financial cycle in particular geographical areas. Originality/value The contribution of this paper is threefold. First, existing literature highlights and empirically tests the impact of economic policy uncertainty on different market, macro-economic and global control variables. The analysis, however, performs it in the reverse order, i.e. analyzing the impact of the momentum effect (investor sentiment variables), equity market inefficiencies and volatility (market variables) and exchange rates and Brent oil (control variables). Second, to check the sensitivity of economic policy uncertainty, the analysis analyzes a wide range of markets, segregated as emerging, developed and European regions over the sample period to generate region-wise implications. Finally, the analysis explores the relationship of aforementioned variables with economic policy uncertainty keeping in view the non-linear structure and prior evidence and investor sentiments and economic policy uncertainty in the regression model.

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Impact of economic sentiment and economic policy uncertainty on travel and leisure stock return

Journal of Hospitality and Tourism Insights ◽

10.1108/jhti-05-2020-0070 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Cited By ~ 1

Author(s):

Abobaker Al.Al. Hadood ◽

Farid Irani

Keyword(s):

Economic Policy ◽

Stock Returns ◽

Stock Index ◽

Policy Uncertainty ◽

Medium Term ◽

Content Type ◽

Economic Policy Uncertainty ◽

European Economic ◽

The Uk ◽

Stock Index Returns

PurposeThis paper considers the role of economic sentiment and economic policy uncertainty (both domestic and European) in explaining the changes in the contemporaneous and future travel and leisure stock index returns in top European Union (EU) tourism destinations, namely, in France, Germany, Spain and the UK.Design/methodology/approachThe authors conducted the ordinary least square (OLS) regression estimations to investigate the impact of changes in economic sentiment and economic policy uncertainty on travel and leisure stock returns. Furthermore, the authors used predictive regressions to determine whether economic sentiment and economic policy uncertainty are useful predictors over the short- or medium-term for travel and leisure stock returns.FindingsEmpirical results revealed that, in France and Spain, the changes in regional economic sentiments predominantly and positively affected travel and leisure stock index returns. Also, results indicated that changes in European economic sentiment have a strong positive effect on the future travel and leisure stock returns in Spain and the UK over the short run, while in France, changes in European economic policy uncertainty have a weak negative effect on the future travel and leisure stock returns over the medium-term.Research limitations/implicationsThis paper provides valuable practical implications for investors who trade travel and leisure stocks. Traders can use economic sentiment and economic policy uncertainty to establish arbitrageur strategies.Originality/valueThis study is the first to examine the effects of economic sentiment and economic policy uncertainty (both domestic and European) on contemporaneous and future travel and leisure stock returns in a top European tourism destination.

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