Title: Impact of economic policy uncertainty on Indian stock market returns: evidence from large-cap, mid-cap and small-cap stocks

Authors: Muhammadriyaj Faniband; Pravin Jadhav

Addresses: Institute of Infrastructure, Technology, Research and Management (IITRAM), Ahmedabad-380026, India ' Institute of Infrastructure, Technology, Research and Management (IITRAM), Ahmedabad-380026, India

Abstract: This study examines the impact of economic policy uncertainty (EPU) in the top 10 economies on the large-cap, mid-cap and small-cap (LMS) stock returns in India using a monthly dataset from January 2004 to May 2021. Our outcomes based on the quantile regression approach unveil interesting findings. First, Canada, France, Japan, the UK and the USA do not affect large, mid and small-cap stock returns. Second, Germany, India and Korea are the only countries that have a substantial and negative impact on LMS stock returns. Third, large and mid-cap stock returns are influenced positively only by Chinese EPU. The impact of the top 10 countries EPU is not homogeneous across LMS stock returns in India, implying that uncertainty regarding economic policy in these economies does not uniformly influence Indian LMS stock. The results derived from our study would be of substantial utility for investors, portfolio managers and policymakers.

Keywords: economic policy uncertainty; EPU; stock market; stock return; large-cap; mid-cap; small-cap; quantile regression; asymmetry dependence; India.

DOI: 10.1504/IJFMD.2023.139117

International Journal of Financial Markets and Derivatives, 2023 Vol.9 No.4, pp.250 - 266

Received: 11 Jan 2023
Accepted: 15 Jul 2023

Published online: 14 Jun 2024 *

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