Excess stock returns, oil shocks, and policy uncertainty in the U.S.

Abstract

This paper examines the dynamic relationships among the excess stock returns, oil shocks, and economic policy uncertainty in the United States (U.S). By using 11 different measures of policy uncertainty shocks, we find that excess stock returns to lead a significant policy uncertainty in general, and there are significant effects of the excess stock returns on all policy uncertainties-economic, monetary, and tax policies in particular. In addition, the results highlight that policy uncertainty in the U.S. is also driven by the oil price shocks in the long-run.