Sensitivity of economic policy uncertainty to investor sentiment:

evidence from Asian, Developed and European markets

Mobeen Ur Rehman

Shaheed Zulfikar Ali Bhutto Institute of Science and Technology

Islamabad, Pakistan

Mobeen.rehman@szabist-isb.edu.pk

Nicholas Apergis

University of Piraeus, Greece

napergis@unipi.gr

1
 Sensitivity of economic policy uncertainty to investor sentiment:

evidence from Asian, Developed and European markets

Abstract

A series of global financial crises in 21st century, steep economic decline and slow

recoveries have intensified the concern of regulatory bodies for economic policy

certainty. This study explores the effect of investor sentiment on economic policy

uncertainty (EPU), spanning the period 1995-2015. The analysis is carried out for Asian,

Developed and the European market samples by applying the method of quantile

regressions. The findings document the presence of a negative impact of investor

sentiment on EPU. Robustness analysis illustrates the validity of the results for the cases

of Asian and Developed markets.

Keywords: Economic policy uncertainty; investor sentiment; Asian, Developed and

European market; quantile regression

JEL Classification: E60; G18

1. Introduction

A series of various economic and financial crises, followed by steep declines and slow

recoveries, raised significant concerns of the role of regulatory bodies regarding

2
economic policy uncertainty through a comparatively new proxy for economic

uncertainty intensified over the last couple of decades (Baker, Bloom and Davis, 2016).

According to Arouri et al. (2014), economic policy defines certain parameters for

decisions, hence, it causes delays in economic activity and decision making attributable

to higher uncertainty levels. However, the reactions to any changes in economic

uncertainty are weak if anticipated earlier. Increasing levels of uncertainty not only cause

firms to delay their investments decisions, but also results in the reversion of preliminary

spending patterns (Leduc and Liu, 2015; Pastor and Veronesi, 2012). Although evidence

in the relevant literature is available as the main locus of macroeconomic variables

affecting economic policy uncertainty (Ali, 2001; Jones and Olson, 2013), the current

literature also documents its effect on household savings (Giavazzi and McMahon, 2012),

delays in firms’ entry (Handley and Limao, 2015), equity market volatility (Pastor and

Veronesi, 2013), and returns on assets (Brogaard and Detzel, 2015). This paper, however,

is analyzing this relationship in the reverse direction, i.e. the sensitivity of Economic

Policy Uncertainty due to investor sentiments in the presence of other macroeconomic

and market variables. The motivation for including macroeconomic control variables

comes from the previous literature: Arouri et al. (2014) report the sensitivity of economic

policy uncertainty to international oil prices in general, and for the cases of the U.S.,

China, Europe and Gulf Countries in particular.

The effect of policy uncertainty on the real economy has been an important topic

of discussion over the last years; however, the interest has been revived substantially after

the turbulence in financial markets caused by the 2008 financial crisis. Previous studies

focus on the effect of policy uncertainty on macroeconomic variables (Bachmann et al.,

3
2013). This work contributes by exploring the predictability of investor sentiment for

EPU. The analysis also considers the momentum effect, stock market returns volatility

and equity pricing inefficiencies across markets, which, to the best of our knowledge, has

not been addressed in the literature. The role of these control variables has collectively

been considered to have important behavioral implications for international investors.

The literature highlights different definitions and interpretations of EPU. Bams et al.

(2017) suggest that uncertainty arises from various sources, i.e. future equity returns,

uncertain future stock prices, inflationary uncertainty, while according to Colombo

(2013), Antonakakis et al. (2013), Klobner and Sekkel (2014), and Karnizova and Li

(2014), this measure has been used as an index by Baker et al. (2016).

The link between the macroeconomy and equity markets has an intuitive appeal.

According to Chau et al. (2016), a higher VIX index causes fear and uncertainty, with

lower values signaling bullishness and complacency. Gulen and Ion (2015) study the

effect of EPU on both firm- and industry-level capital investments and find that it can

seriously affect investments. Liu and Zhang (2015) find EPU to be a decent predictor of

stock market volatility. Investor sentiment induces large swings in business cycles;

however, understanding its ability to cause changes in EPU helps policymakers to predict

and minimize such fluctuations. The literature discusses the effect of EPU on equity

market volatility, along with other macroeconomics; however, no study has investigated

the inverse relationship, i.e. whether EPU is sensitive to other factors, such as investor

sentiment, proxied by stock market volatility, the momentum effect and equity pricing

inefficiencies. To measure the sensitivity of EPU to stock market volatility, both the

momentum effect and international equity pricing inefficiencies are considered, while the

4
analysis uses the method of quantile regressions, which have the advantage to identify the

underlying relationship that could not have been otherwise revealed through the overall

distribution. Quantile regression provides a clear way of understanding how the

relationship between market returns and other conditioning variables or risk factors

changes across the distribution of conditional returns. Quantile regressions identify points

in the conditional distribution where omitted variables are favorably and/or unfavorably

influencing returns. We may think of these omitted factors as representing idiosyncratic

shocks, or as the receipt of bad news during the sample period by firms located in the

lower quantiles. By using quantile regression, researchers can explore whether the market

prices firms’ underlying characteristics consistently given different degrees of good

versus bad news. Such idiosyncratic shocks likely influence idiosyncratic volatility,

which Campbell et al. (2001) and Goyal and Santa-Clara (2002) find to be a major

component of the volatility of individual stock returns.

The contribution of this paper is threefold. First, existing literature highlights and

empirically tests the impact of economic policy uncertainty on different market, macro-

economic and global control variables. The analysis, however, performs it in the reverse

order, i.e. analyzing the impact of the momentum effect (investor sentiment variables),

equity market inefficiencies and volatility (market variables), and exchange rates and

Brent oil (control variables). Second, to check the sensitivity of economic policy

uncertainty, the analysis analyzes a wide range of markets, segregated as emerging,

developed and European regions over the sample period to generate region-wise

implications. Finally, the analysis explores the relationship of aforementioned variables

with economic policy uncertainty keeping in view the non-linear structure, as well as

5
prior evidence and investor sentiments and economic policy uncertainty in the regression

model.

The results for quantile regressions provide robust and more efficient estimates rather

than those coming from the traditional regression model. The momentum effect is

negative and significant only at higher quantiles, while oil prices are positive and

significant across all quantiles. The exchange rate exerts a negative and significant effect

on EPU, whereas equity price volatility (i.e., investor sentiment) exerts a negative and

significant impact on EPU in most of the quantiles.

2. Data and ethodology

The proposed model consists of economic policy uncertainty as the dependent variable,

sensitive to the momentum effect, equity pricing volatility and pricing differences in the

presence of international Brent oil prices and spot exchange rates. EPU represents the

economic risk for a country, because of an uncertain path of government policy, leading

towards an escalating risk premium and causing delays in individual and business

spending until the uncertainty resolves. This EPU can interchangeably refer towards

fiscal or monetary policy uncertainty, uncertain electoral outcomes, or tax regimes. Data

on EPU are based on three main components: the newspaper coverage of economic

uncertainty in relevance to policy issues, the provision set for the federal tax code for

future years, and the disagreement across economic forecasters. China, India and Japan

represent the major Asian economies whereas, for the case of developed economies,

indices from the US, the UK and Europe (represented by a composite index) are used.

6
Data for economic policy uncertainty are sourced from

http://www.policyuncertainty.com/. The analysis uses the Market Integration index-MI

(Connor and Korajczyk, 1989), which captures pricing differences across equity markets

based on systematic risks across countries. They postulate that pricing errors, represented

by an intercept term in the International Capital Asset Pricing Model, measure the extent

of market segmentation; if all assets are priced according to their similar systematic risk,

there is a perfect integration across stock markets and the value of the intercept equals

zero. Pricing errors increase with higher official barriers, transaction costs and taxes to

international asset trading. The MI index (equation 2 as an extension of equation 1),

therefore, measures equity pricing differences across markets, represented by an absolute

value of the intercept as:

𝑹𝑹𝒊𝒊,𝒕𝒕 − 𝑹𝑹𝑹𝑹𝒊𝒊,𝒕𝒕 = 𝜶𝜶𝒊𝒊,𝒕𝒕 + 𝜷𝜷𝒊𝒊,𝒕𝒕 �𝑹𝑹𝑹𝑹𝒊𝒊,𝒕𝒕 − 𝑹𝑹𝑹𝑹𝒊𝒊,𝒕𝒕 � + 𝜺𝜺𝒊𝒊,𝒕𝒕 (1)

𝑹𝑹𝒊𝒊,𝒕𝒕 = 𝜶𝜶𝒊𝒊,𝒕𝒕 + 𝜷𝜷𝒊𝒊,𝒕𝒕 𝑹𝑹𝑹𝑹𝒊𝒊,𝒕𝒕 + 𝜺𝜺𝒊𝒊,𝒕𝒕 (2)

where Ri,t is the returns on international indices, RFi,t is the risk free rate, β represents the

systematic risk of the market proxied by S&P1200. The absolute value of α proxies

pricing differences of equity returns. A zero value implies no mispricing. For equity

market volatility, we source daily pricing data to take monthly averages and calculate as

[logPt-logPt-1], where P denotes equity prices. The momentum effect is calculated by the

stock markets’ trading volume. Data on equity prices for volatility and the stocks trading

volume for the momentum effect are sourced from Datastream. Exchange rates data are

sourced from the IMF and are relative to the US dollar. Global oil prices are closing spot

prices (converted to a monthly basis by taking their daily average) measured as the West

7
Texas Intermediate (WTI) crude oil prices. Data span the period 1995-2015 and are on a

monthly basis.

Figures 1a-1c represent the economic policy uncertainty trend over the sample

period for three markets segments, i.e. Asian, Developed and European markets,

respectively. Figure 1a highlights more turbulence in the economic policy uncertainty of

China compared with India throughout the period. Figure 1b displays the economic

policy uncertainty trend between the US and the UK, with UK exhibiting a more

inconsistent pattern, especially after 2000. Finally, Figure 1c compares the economic

policy uncertainty across the European markets and highlights that France is following a

rather comparatively inconsistent behavior. This high uncertain behavior emerges during

the global financial crisis of 2008-09 and continues afterwards. Few uncertainty spikes

are also visible for the case of Spain in 2003, which, however, follows a normal course

ahead. Table 1 provides descriptive statistics for selected sub-sampled as well as

complete markets.

[Insert Figures 1a-1c and Table 1 about here]

Table 2 presents the panel unit root properties of the model variables, with the results

indicating various degrees of stationarity across the variables included in the modeling

approach, as well as across the countries included in the sample analysis. Next, the

analysis explains the suitability of the quantile regression model by first testing the

presence of non-linearity in economic policy uncertainty using the BDS test (Brock et al.,

1996). The results are reported in Table 3 and provide strong evidence of non-linearity

for different embedding dimensions of the BDS test. The results suggest that linear

8
regression models might not be able to capture the sensitivity of economic policy

uncertainty to included variables (i.e., the momentum effect, equity pricing volatility,

pricing differences, Brent oil prices and spot FX rates) and, therefore it could be a

necessity to use the contemporary quantile regression testing methodology.

[Insert Tables 2 and 3 about here]

3. Methodology and empirical analysis

3.1 Quantile regression

To analyze the sensitivity of economic policy uncertainty to the momentum effect, equity

pricing volatility and pricing differences in the presence of international Brent oil prices

and spot exchange rates, the empirical analysis focuses not only on the conditional mean,

but also on the tails of the conditional distribution by estimating through a quantile

regression framework. To this end, the analysis makes use of both OLS (mean results)

and the quantile regression methodology, introduced by Koenker and Basset (1978), as

the relationship between economic policy uncertainty and the momentum effect, equity

pricing volatility, pricing differences needs not be the same across the conditional

distribution of oil returns (Du et al., 2015), especially in the presence of international

Brent oil prices and spot exchange rates. The advantage of this methodological approach

is that it is a semi-parametric method, which does not make any pre-suppositions about

the parametric distribution of the error process. The τth conditional quantile is defined as

the value Qτ(yt|yt-1, ..., yt-q), such that the probability that economic policy uncertainty is

9
conditional on its determinants will be less than Qτ(yt|yt-1, ..., yt-q) is τ. By estimating at

different quantiles, τ ε(0,1) we can get a set of estimates of the impact of determinants in

different quantiles, running from 0.10 to 0.90.

Table 4 reports both the mean and the quantile regression results for the full

sample at different quantiles (0.10-0.90). Estimations based on the entire distribution

focus on the mean and information about the tails of the distribution is lost. By contrast,

quantile regressions provide robust and more efficient estimates. The momentum effect is

negative and significant; pricing differences are positive and significant, only at higher

quantiles. Among the control variables, the exchange rates remain insignificant across the

majority of the quantiles. Stock price volatility (i.e., investor sentiment) exerts a negative

and significant impact on EPU across all quantiles, except in the 0.90 quantile, with the

overall distribution estimates highlighting the effect as statistically significant. WTI

Crude oil prices are positive and significant across all quantiles, suggesting a major

influence on economic policy uncertainty. These results suggest that the levels of

economic policy uncertainty are sensitive to the raising global oil prices in the full

sample; however, sub-sample findings are reported in the forthcoming discussion.

[Insert Table 4 about here]

Table 5 presents the results of quantile regression for the case of Asian economies i.e.

China and India. The momentum effect changes from negative in the full sample to

positive in the Asian sub-sample; however, the significant coefficients are observed in the

middle (0.40-0.50) and higher (0.80-0.90) quantiles. Pricing differences previously

10
insignificant in the full country sample now become positive and significant in the case of

Asian markets. The results in Table 4or 5??? highlight, therefore, the significance of the

momentum effect, price volatility and pricing difference, but at varying quantile

arrangements. Among the control variables, we can illustrate the significant coefficient

values of exchange rates, along with Brent oil towards the economic policy uncertainty of

Asian markets. This changing behavior of the exchange rates from the insignificant (in

the full sample) towards significantly positive (the Asian market sub-sample) highlights

its importance for the Asian countries that might be attributed to the higher sensitivity of

their respective currencies compared with the US dollars, as well as to the increasing

volume of foreign inwards remittances.

[Insert Table 5 about here]

Table 6 reports the results for the quantile regression framework for the case of the

Developed markets sample. These results are somewhat different from the two previous

country samples. They document that among all the variables, stock market volatility

remains significant as before; however, the remaining variables remain insignificant. The

momentum effect remains insignificant across all quantiles, while pricing differences

document significant negative coefficients across the majority of the quantiles

(specifically, from 0.50-0.90). Likewise, a disparity is also observed for the control

variables where except in the higher quantiles, both the Brent oil and exchange rates

remain insignificant. However, we can witness significant positive coefficients for the

11
case of Brent oil and significant negative coefficients for the case of exchange rates in

higher quantiles.

[Insert Table 6 about here]

Finally, we report in Table 7 the results for the European market sample, where different

results are reported for equity pricing volatility. Unlike all other sample countries, pricing

volatility exhibits an insignificant behavior across all quantiles. Similar results are also

reported for the momentum effect (except for the last quantile). Equity pricing

differences remain insignificant in lower quantiles; however, they exhibit a significant

negative role in upper quantiles. In contrast, exchange rates render an insignificant

behavior in the majority of the quantiles, except in the last two quantiles.

[Insert Table 7 about here]

4. Conclusion

This paper investigated the impact of investor sentiment on EPU. We proxied the investor

sentiment through equity pricing volatility, while the momentum effect was captured

through the trading volume and equity pricing inefficiencies. We also included global

control factors, as WTI Crude oil and exchange rates. Keeping in view the non-linear

structure of economic policy uncertainty and the current literature on behavioral finance,

the analysis applied the quantile regression approach through which the evidence

12
suggested a negative impact of investor sentiment on EPU. The analysis also divided the

sampled markets into three different sub-samples, i.e. Asian, Developed and European

markets. The full sample results suggested that equity price volatility remained as the

most significant driver of economic policy uncertainty, along with Brent oil prices,

implying that economic policy uncertainty was sensitive to international oil prices;

however, exchange rate remained statistically insignificant. Pricing differences and

exchange rates became significant for the case of Asian countries, along with pricing

volatility. This may be attributed to the fact that the emerging markets of Asia receive

huge remittance inflows from the developed countries, due to which their exchange rate

variable per US dollar renders itself as a significant driver. The significance of equity

pricing differences is due to the fact that the emerging status of Asian countries leads the

equity pricing inefficiencies from their developed counterparts. The results from the

developed markets resemble with the complete sample results, where economic policy

uncertainty shows sensitivity only to equity price volatility in almost all quantiles, while

both Brent oil prices and exchange rates only in higher quantiles. The results in the case

of European countries sample differentiate from other markets, as equity pricing

differences negatively influence economic policy uncertainty in these countries, with the

remaining of the variables remaining statistically insignificant. However, Brent oil retains

its position as an important determinant of economic policy uncertainty.

The results have important implications for international investors and

policymakers, especially in terms of the breakdown of economic policy uncertainty

across different sample markets. The breakdown of complete sample period into sub-

samples acts as a robust analysis and documents the similarity of the results for the Asian

13
and Developed markets cases, but not in the case of the European markets. The findings

imply the importance of financial stability that impacts the accumulation of systemic

risks and add smoothness to the financial cycle in particular geographical areas.

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Figure 1b
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01-Jan-06
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Germany
Table 1: Descriptive statistics
Economic policy Momentum Price Equity pricing Brent oil Exchange
Statistic
uncertainty effect volatility inefficiencies prices rates
Complete sample:
Mean 1774.914 10.517 0.128 378.435 53.146 80.618
Std. dev. 101.946 7.627 0.016 100.864 46.840 1.432
Skewness 437.000 0.217 3.973 4.983 13.880 2.499
Kurtosis 11.287 1.670 -3.579 -81.668 11.350 0.753
JB Stat. 69.420* 184.861 0.366* 81.757* 31.354* 37.416*
Emerging Asian
market sample:
Mean 99.082 10.929 0.504 59.824 53.243 39.438
Std. dev. 44.002 3.852 0.503 70.080 31.369 29.814
Skewness 1.046 0.510 -0.032 2.948 0.454 0.275
Kurtosis 4.444 5.469 1.029 14.767 1.918 1.462
JB Stat. 134.940* 149.867* 81.180* 36.760* 41.625* 55.688*
Developed market
sample:
Mean 112.579 18.224 0.048 906.843 53.051 52.629
Std. dev. 56.351 34.356 0.231 12.540 31.366 73.399
Skewness 1.799 -0.808 2.453 1.337 0.462 0.755
Kurtosis 7.425 1.745 21.525 3.526 1.924 1.631
JB Stat. 104.483* 131.957* 11.210* 23.950* 63.369* 130.801*
European market
sample:
Mean 3862.880 4.532 0.002 139.283 53.169 122.243
Std. dev. 98.498 5.365 0.208 18.238 31.367 498.859
Skewness 2.465 1.953 1.477 1.847 0.456 4.228
Kurtosis 7.985 6.267 23.530 8.062 1.920 19.081
JB Stat. 26.637* 189.398 277.120* 12.556* 83.562* 13.670*

19
Table 2: Unit root tests
Economic policy Momentum Price
uncertainty effect volatility
Level 1st Differences Level 1st Differences Level 1st Differences
D DT D DT D DT D DT D DT D DT
China 0.5532 1.8814 2.3575 1.0722 47.6744 37.8485 0.2941 0.7202 0.3146 0.8442 34.0737 65.6093
India 4.4714 7.4805 0.1485 0.5381 1.1093 8.9150 1.2080 4.6577 0.2686 0.9966 4.2085 3.9013
US 0.7454 2.6940 0.0471 0.0976 61.4658 12.9864 0.1224 0.4512 36.0964 22.3395 0.2097 0.7732
UK 1.5091 4.4178 0.2581 0.8619 8.8831 26.1975 0.9620 2.2604 43.6229 38.9401 74.5752 65.3688
Japan 0.5532 1.8814 0.3575 1.0722 8.4635 9.5893 0.0583 0.2078 24.4433 22.0863 59.5054 57.1080
Germany 0.4857 1.1231 0.3922 0.9512 2.3786 9.0581 0.2122 0.7891 30.7117 28.7438 80.0625 69.9011
Italy 18.8168 20.0832 0.2376 0.8408 1.7852 10.3226 0.0417 0.1550 3.8061 9.1686 21.7323 59.0384
France 4.0463 3.6297 0.2581 0.5254 1.1449 9.8355 0.2173 0.8082 93.2599 85.9657 17.5714 15.4777
Spain 0.3825 1.3234 0.0416 0.1435 1.1122 9.5670 0.2586 0.8788 24.6518 24.3981 68.6865 60.4397
Equity pricing Exchange
Brent oil prices
inefficiencies rates
Level 1st Differences Level 1st Differences Level 1st Differences
D DT D DT D DT D DT D DT D DT
China 4.4417 3.6794 0.1953 0.7254 6.6977 6.0905 0.2722 0.9017 29.3176 12.0528 0.4259 1.0954
India 1.9738 6.5173 0.1946 0.7232 6.6977 6.0905 0.2722 0.9017 67.0221 6.5360 0.2068 0.7563
US 24.5972 5.3361 0.1992 0.7311 6.6977 6.0905 0.2722 0.9017 3.4142 12.0453 0.3020 0.9281
UK 2.2976 3.9576 8.1881 31.0558 6.6977 6.0905 0.2722 0.9017 4.6284 16.1184 0.3070 0.9020
Japan 4.5760 3.7948 0.1952 0.7250 6.6977 6.0905 0.2722 0.9017 2.9485 9.5990 0.2435 0.8640
Germany 0.9958 3.6533 0.2051 0.7317 6.6977 6.0905 0.2722 0.9017 27.6262 12.6187 0.3005 0.9903
Italy 2.5470 4.8416 54.0592 200.4114 6.6977 6.0905 0.2722 0.9017 30.4015 16.2132 0.2892 1.0196
France 5.2058 1.4332 15.2972 56.8709 6.6977 6.0905 0.2722 0.9017 46.9670 24.8870 0.1453 0.5342
Spain 1.7642 6.1568 0.2003 0.7285 6.6977 6.0905 0.2722 0.9017 30.4015 16.2132 0.2892 1.0196

20
 Table 3: BDS test statistics
Economic Policy
m
Uncertainty
2 3 4 5 6

China 0.0805* 0.1350* 0.1662* 0.1780* 0.1797*

(0.0057) (0.0090) (0.0107) (0.0112) (0.0108)
India 0.0670* 0.1177* 0.1517* 0.1694* 0.1762*
(0.0054) (0.0086) (0.0103) (0.0107) (0.0104)
US 0.1284* 0.2152* 0.2690* 0.2973* 0.3107*
(0.0049) (0.0078) (0.0093) (0.0097) (0.0094)
UK 0.1172* 0.2058* 0.2698* 0.3051* 0.3304*
(0.0051) (0.0081) (0.0097) (0.0101) (0.0098)
Europe 0.1029* 0.1738* 0.2147* 0.2345* 0.2437*
(0.0044) (0.0070) (0.0083) (0.0087) (0.0084)
France 0.0890* 0.1681* 0.2145* 0.2420* 0.2592*
(0.0042) (0.0067) (0.0080) (0.0083) (0.0081)
Germany 0.0663* 0.1061* 0.1213* 0.1286* 0.1294*
(0.0052) (0.0083) (0.0099) (0.0103) (0.0099)
Italy 0.0586* 0.0965* 0.1128* 0.1164* 0.1125*
(0.0047) (0.0075) (0.0089) (0.0093) (0.0090)
Spain 0.0447* 0.0780* 0.0969* 0.1049* 0.1054*
(0.0047) (0.0074) (0.0088) (0.0092) (0.0089)
Japan 0.0433* 0.0732* 0.0815* 0.0838* 0.0770*
(0.0043) (0.0068) (0.0081) (0.0084) (0.0080)
Notes: m denotes the parameter m in the embedding dimension and ε is the epsilon values. Standard errors values are
reported in parenthesis. * denotes significance level at 5% or better.

Table 4: Quantile regressions-full sample

Mean
Q10 Q20 Q30 Q40 Q50 Q60 Q70 Q80 Q90
Results
89.383 40.500*** 53.733*** 66.721*** 75.883*** 81.787*** 91.862*** 101.386*** 125.94*** 166.63
Intercept
(212.147) (3.198) (3.042) (2.978) (3.194) (3.579) (4.249) (4.684) (8.222) (1876.180)
-88.411*** 0.263 0.093 -0.152 -0.358* -0.208 -0.336 -0.642*** -1.733*** -792.632***
Momentum
(9.731) (0.169) (0.169) (0.181) (0.185) (0.205) (0.236) (0.271) (0.423) (85.740)
-41.049 -11.213** -10.159** -12.309** -12.705** -16.534** -22.389** -28.155*** -36.314*** -219.663
Price volatility
(-45.105) (4.965) (3.265) (5.326) (5.236) (5.068) (7.220) (3.368) (5.216) (198.283)
Pricing -0.000 0.004** 0.001 0.000 0.001 -0.001 -0.004* -0.007** -0.012*** 0.0169

differences (-0.011) (0.001) (0.001) (0.001) (0.001) (0.002) (0.002) (0.002) (0.003) (0.085)
3.181*** 0.299*** 0.314*** 0.350*** 0.427*** 0.556*** 0.744*** 1.011*** 1.502*** 23.430***
Brent oil
(0.640) (0.040) (0.038) (0.037) (0.042) (0.049) (0.071) (0.071) (0.166) (5.250)
-0.390 0.002 0.000 0.002 0.002 -0.000 0.005 0.008 0.003 -3.531***
Exchange rate
(0.059) (0.026) (0.003) (0.004) (0.004) (0.042) (0.006) (0.005) (0.004) (0.435)
Note: * p ≤ 0.10; ** p ≤ 0.05; *** p ≤ 0.01. Values in parenthesis represent standard errors

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Table 5: Quantile regressions-Asian markets
Mean
Q10 Q20 Q30 Q40 Q50 Q60 Q70 Q80 Q90
Results

68.044*** 37.143** 51.653*** 55.926*** 58.042*** 69.895*** 87.669** 86.346*** 89.334*** 76.388***
Intercept
(10.008) (12.229) (7.998) (7.234) (7.320) (7.355) (7.726) (10.199) (14.091) (15.921)
1.205* 0.738 0.354 0.518 0.910** 0.835** 0.335 0.728 1.549* 4.881***
Momentum
(0.699) (0.958) (0.551) (0.482) (0.414) (0.399) (0.446) (0.731) (1.064) (1.255)
-
-35.484
Price volatility -48.277** -37.361** -38.056** -34.009** 45.671*** -57.304*** -50.057** -28.486 19.869
(38.859) (15.923) (14.666) (13.603) (14.390) (15.976) (18.082) (21.664) (24.977) (30.453)
Pricing 0.028 0.088*** 0.081*** 0.057*** 0.059*** 0.033 0.021 -0.004 -0.043 -0.038

differences (0.027) (0.029) (0.018) (0.019) (0.021) (0.021) (0.023) (0.031) (0.037) (0.040)
0.200** 0.061 0.142*** 0.151*** 0.200*** 0.166** 0.121* 0.257** 0.312** 0.392**
Brent oil
(0.091) (0.089) (0.075) (0.072) (0.070) (0.074) (0.076) (0.089) (0.097) (0.173)
0.523 0.556* 0.3845 0.494** 0.437 0.617*** 0.829*** 0.813** 0.616 -0.041
Exchange rate
(0.330) (0.253) (0.239) (0.229) (0.249) (0.280) (0.323) (0.385) (0.427) (0.580)
Note: Similar to those in Table 1.

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Table 6: Quantile regressions-developed markets
Mean
Q10 Q20 Q30 Q40 Q50 Q60 Q70 Q80 Q90
Results
84.464*** 65.076** 64.085** 86.101*** 91.200*** 62.658*** 55.673** 89.854*** 107.70*** 137.83***
Intercept
(25.205) (24.377) (21.134) (22.233) (22.623) (23.786) (20.105) (22.587) (24.420) (45.5836)
0.408 -0.677 -0.258 -0.907 -0.784 0.949 1.943** 1.153 1.121 1.129
Momentum
(1.156) (1.164) (0.993) (1.056) (1.075) (1.124) (0.940) (1.033) (1.088) (1.927)
-24.376 9.740** 3.677 -1.661 -8.659* -16.502** -27.459*** -41.612*** -56.175*** -80.731***
Price volatility
(26.119) (3.345) (3.677) (3.823) (4.433) (5.212) (5.673) (7.234) (8.600) (13.078)
Pricing -0.007 0.004* 0.001 -0.000 -0.001 -0.004* -0.007** -0.012* -0.017** -0.025*

differences (0.002) (0.002) (0.002) (0.002) (0.002) (0.002) (0.003) (0.003) (0.003) (0.003)
0.578 0.148 0.269* 0.336 0.392 0.560 0.667 0.794*** 0.928*** 1.109
Brent oil
(0.098) (0.087) (0.079) (0.065) (0.063) (0.082) (0.086) (0.104) (0.121) (0.194)
-0.112* -0.028 -0.037 -0.096 -0.101 -0.054 -0.041 -0.136* -0.199** -0.313**
Exchange rate
(0.075) (0.067) (0.057) (0.061) (0.063) (0.067) (0.062) (0.070) (0.080) (0.145)
Note: Similar to those in Table 1.

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Table 7: Quantile regressions-European markets
Mean
Q10 Q20 Q30 Q40 Q50 Q60 Q70 Q80 Q90
Results
90.032 39.359*** 50.742*** 59.393*** 64.531*** 72.182*** 83.452*** 81.481*** 216.276 142.870
Intercept
(118.145) (5.762) (6.364) (7.282) (7.767) (8.907) (10.165) (15.249) (665.329) (336.476)
-60.726*** 0.333 0.346 0.372 0.770 0.719 0.462 0.304 -17.914 -531.93***
Momentum
(-16.429) (0.370) (0.410) (0.433) (0.440) (0.469) (0.519) (0.763) (29.679) (114.778)
41.193 -7.238 -2.863 0.529 1.355 -3.525 -10.565 -11.317 389.467 14.892
Price volatility
(125.571) (6.828) (8.488) (4.394) (4.655) (9.972) (10.231) (10.878) (409.527) (665.165)
Pricing -7.407*** -0.023 -0.044 -0.048 -0.052 -0.098*** -0.157** -0.366*** -23.520*** -42.354***

differences (0.783) (0.031) (0.032) (0.032) (0.033) (0.039) (0.049) (0.138) (1.629) (5.066)
39.789*** 0.397* 0.546*** 0.703** 0.857*** 1.187*** 1.695** 3.889*** 177.154*** 171.673***
Brent oil
(5.328) (0.081) (0.090) (0.096) (0.107) (0.151) (0.232) (1.256) (11.05) (34.893)
-0.573*** 0.002 0.002 0.002 -0.000 0.002 0.001 -0.008 -1.335** -3.825***
Exchange rate
(0.112) (0.004) (0.004) (0.004) (0.004) (0.006) (0.006) (0.008) (0.189) (0.786)
Note: Note: Similar to those in Table 1.

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