| Popis: |
We investigate the impact of economic policy uncertainty in the U.S., France, Spain, Germany, the U.K., Italy and China on the long run volatility in the Moroccan stock market. For this reason, we combine both daily returns and monthly uncertainty data in the GARCH-MIDAS model. We decompose total volatility into a long run persistent component and short run cyclical component. This study will contribute to stock market research and international economic policy uncertainty (EPU). Our findings show that, before the global financial crisis (GFC) of 2008, the link between the Moroccan stock market and the EPU is generally insignificant for the long run volatility component, namely for France and Spain. However, this effect was relatively significant with the U.S. and German economic policy uncertainty. This result means that the total variance was more explained by the short run volatility component generated by daily stock market returns. Nevertheless, during the post-crisis period we compare our results with benchmark GARCH models by using the AIC criterion and variance ratios values. They display that almost all GARCH-MIDAS models with economic policy uncertainty perform significantly in explaining the long run volatility in the Moroccan stock market, particularly, the EPU of France, Spain and the US. Our paper findings could be very helpful for policy makers and portfolio managers. Understanding the long-term relationship between the Moroccan stock market volatility and international economic policy uncertainty can be crucial in terms of adopting efficient decisions. They can also improve the efficiency of asset allocation for investors. |
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