Economic uncertainty and Australian stock returns
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Li, Bin
Worthington, Andrew C
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Abstract
Motivated by the purportedly close relation between economic uncertainty and future stock returns in the US, we investigate the predictive role of this potential factor in the Australian stock market. Applying portfolio-sorting strategies based on economic uncertainty exposure measured by individual stock betas, we find that uncertainty betas negatively relate to future stock returns over short- and medium-term trading horizons. Moreover, common asset pricing models, including the capital asset pricing model (CAPM) and the Fama and French three-, five-, and six-factor models, cannot explain these relations. The results remain robust when applying firm-level Fama and MacBeth regressions.
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Accounting & Finance
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© 2021 AFAANZ. This is the peer reviewed version of the following article: Economic uncertainty and Australian stock returns, Accounting and Finance, which has been published in final form at https://doi.org/10.1111/acfi.12892. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
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Applied economics
Banking, finance and investment
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Chen, X; Li, B; Worthington, AC, Economic uncertainty and Australian stock returns, Accounting & Finance