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ASYMMETRIC EFFECTS OF TRADE POLICY UNCERTAINTY ON THE STOCK MARKET: EVIDENCE FROM THE MARKOV REGIME SWITCHING MODEL

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Bibliographic Details
Title: ASYMMETRIC EFFECTS OF TRADE POLICY UNCERTAINTY ON THE STOCK MARKET: EVIDENCE FROM THE MARKOV REGIME SWITCHING MODEL
Authors: Ayşegül Şahin
Source: Ekonomi Maliye İşletme Dergisi, Vol 8, Iss 1, Pp 78-90 (2025)
Publisher Information: Ekonomi Maliye Isletme Dergisi, 2025.
Publication Year: 2025
Subject Terms: markov rejim değişim modeli, trade policy uncertainty, Social Sciences, HD28-70, ticaret politikası belirsizliği, Economics as a science, HG1-9999, Management. Industrial management, s&p 500, markov regime switching model, HB71-74, s&p500, Finance
Description: This study examines the S&P 500 index using the Markov Regime Switching model to analyze the effects of trade policy uncertainty on financial markets. Trade policy uncertainty can increase the volatility of financial markets by affecting investor confidence and asset prices through various transmission channels. The study found that the effect of trade policy uncertainty on the stock market index varies depending on the market regime. The findings show that trade policy uncertainty has a negative and significant impact in the stock market uptrend regime (Regime 0). Decreased trade policy uncertainty allows investors to invest more by reducing risk perception. In Regime 1, it is shown that the increases in trade policy uncertainty prevent new stock investments even if there are no serious exits from the stock market. The study's findings reveal that measures to reduce uncertainty in trade policies are critical for financial markets. Policy recommendations such as transparent trade policies, risk management strategies, and investors' portfolio diversification mechanisms are presented in this direction.
Document Type: Article
ISSN: 2667-4378
DOI: 10.46737/emid.1643258
Access URL: https://doaj.org/article/07a812cb1d6649148f0e034c333f6b1a
Accession Number: edsair.doi.dedup.....e34d72ebadcac9118753d4940b5c8214
Database: OpenAIRE
Description
Abstract:This study examines the S&P 500 index using the Markov Regime Switching model to analyze the effects of trade policy uncertainty on financial markets. Trade policy uncertainty can increase the volatility of financial markets by affecting investor confidence and asset prices through various transmission channels. The study found that the effect of trade policy uncertainty on the stock market index varies depending on the market regime. The findings show that trade policy uncertainty has a negative and significant impact in the stock market uptrend regime (Regime 0). Decreased trade policy uncertainty allows investors to invest more by reducing risk perception. In Regime 1, it is shown that the increases in trade policy uncertainty prevent new stock investments even if there are no serious exits from the stock market. The study's findings reveal that measures to reduce uncertainty in trade policies are critical for financial markets. Policy recommendations such as transparent trade policies, risk management strategies, and investors' portfolio diversification mechanisms are presented in this direction.
ISSN:26674378
DOI:10.46737/emid.1643258