Economic policy uncertainty, sentiment and Brazilian stock market performance

Authors

DOI:

https://doi.org/10.1590/1808-057x20231877.en

Keywords:

economic policy uncertainty, investor sentiment, market performance, asymmetric effects, NARDL

Abstract

The aim of this article was to investigate the causal relationships between economic policy uncertainty, investor sentiment, and the performance of the Brazilian market, while taking into account the presence of asymmetries and both short- and long-term cointegration. In market dynamics, it is expected that economic policy uncertainty, investor sentiment, and market performance will show some degree of relationship. In the Brazilian context, the analysis of these three variables has not been carried out, especially considering their assymmetric interrelations and the behavior of the relationships in the short and long term simultaneously. Understanding these relationships is important because it allows agents to know the potential impacts that these variables have on each other, which will facilitate informed decision-making among the involved parties. The results obtained are relevant for investment strategies, as informed investors will direct their decisions towards minimizing their exposure to market fluctuation, based on identified causal relationships and anticipating potential market movements. Utilizing a nonlinear autoregressive distributed lag model, the study showed that the relationships between investor sentiment, economic policy uncertainty, and stock market performance are more complex than suggested by previous studies applied to the Brazilian market. We identified asymmetric short- and long-term relationships not previously observed.

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Published

2024-05-29

Issue

Section

Original Articles

How to Cite

Bitencourt, W. A., & Iquiapaza, R. A. (2024). Economic policy uncertainty, sentiment and Brazilian stock market performance. Revista Contabilidade & Finanças, 35(94), e1877. https://doi.org/10.1590/1808-057x20231877.en