Influence of Economic Policy Uncertainty on Accruals and Abnormal Returns
Keywords:Abnormal returns, Accruals anomaly, Economic Policy Uncertainty, EPU
Objective: Analyze the relationship between economic policy uncertainty in the Brazilian stock market and the accruals anomaly from 2010 to 2019.
Method: Time series procedures were carried out for the CAPM model with the inclusion of accruals factor, in order to obtain the abnormal return resulting from the analyzed factor. Thus, it was evaluated how the economic policy uncertainty affected the abnormal return due to the calculated accruals, through the approach of fixed effects panel with clustered robust standard errors.
Results and Discussion: The results of the study suggest that economic policy uncertainty influences abnormal accruals returns, showing that stocks have lower returns in periods of greater economic policy uncertainty. Results are consistent with the fact that increases in economic policy uncertainty can induce investors to sell shares, reducing share prices and, consequently, their returns. Despite this, rational investors could reap premiums of uncertainty as prices recover in subsequent moments.
Contributions: Economic policy uncertainty can be considered an important topic for academy and policymakers, as well as the analysis of impacts of returns on equity markets. In addition, the study can help portfolio managers and investors in the financial markets in order to improve the stability of policy implementation and avoid abnormal fluctuations in equity markets, as well as suggest investment strategies with perspectives based on economic policy uncertainty.
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