The effect of the uncertainty of economic policies and people's health on the excess returns of companies in different quantiles
Subject Areas : -Health economyHASAN ESMAELI 1 , Manijeh Hadinejad 2 , مرجان دامن کشیده 3 , شهریار نصابیان 4
1 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
3 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
4 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
Keywords: efficiency, company surplus, uncertainty, economic policies, health of people, quantile,
Abstract :
Introduction: Economic uncertainty, which means difficulty in predicting the economic environment, comes from various factors such as political instability, change and uncertainty of government policies, natural disasters and market fluctuations, which can affect the surplus efficiency of companies. Also, people's health is also considered as another important factor affecting the surplus efficiency of companies. Methods: Accordingly; the main purpose of this research is to investigate the effect of uncertainty of economic policies and people's health on the surplus efficiency of companies in different quantiles in the period of 1385 to 1401. Quantile regression is a statistical method that was first introduced by Koenker and Bassett (1978). One of the advantages of this model is to identify the shape of the distribution of the dependent variable of the model at different levels of the independent variable. Results: The estimation of the research model using the quantile regression method indicates that the transmission of the oil price to the surplus stock market, in addition to the direct route, also takes place indirectly through the exchange rate channel. So that in the higher quantiles, i.e. when the stock market is booming, the change in oil price return on the stock market is only indirect and through the exchange rate channel, and the decrease in oil prices (oil revenues) is the same as in the two sanctions periods, it strengthens the stock market through the increase of the exchange rate. In addition, it was observed that the increase in air pollution, which is a measure of people's health, causes people to invest less in stocks due to lower income and increased health risks; When the stock supply remains relatively constant and the demand decreases, the stock price and yield also decrease, and accordingly, air pollution at its higher levels can lead to a decrease in the excess yield of firms. Conclusion: Based on the findings of the research, it is concluded that in examining the factors affecting the surplus efficiency of companies, the two factors of economic policy uncertainty and people's health should be considered, so that the increase in economic policy uncertainty leads to a decrease in surplus efficiency and Also, the increase in air pollution and the decrease in people's health also lead to a decrease in the surplus efficiency of companies.
1. Gu, X., Chen, Y., Pan, S., 2020. Economic policy uncertainty and innovation: Evidence from listed companies in China. J. Econom. Res. J. 2, 109–123.
2. Kim, J. R. and Chung, K. (2017). the role of house price in the US business cycle. Empirical Economics, 51: 71-92.
3. Davidson, P & Froyen (1991). "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective " The Journal of Economic Perspectives. VOL.5. PP.129–143.
4. Gupta, S., Davoodi, H., & Tiongson, E. (2021). Corruption and the provision of health care and education services. In K. J. Arvind (Ed.), The Political Economy of Corruption (pp. 123–153). International Monetary Fund.
5. Wang, Y., Zhang, B., Diao, X., & Wu,C. (2015). “Commodity price changes and the predictability of economic policy uncertainty”. Economics Letters, 127(February), 39– 42.
6. Jurado, K., Ludvigson, S.C., Ng, S., 2015. Measuring uncertainty. Am. Econ. Rev. 105, 1177–1216.
7. Yung, K., Root, A., (2019). Policy uncertainty and earnings management: international evidence. J. Bus. Res. 100 (July), 255–267.
8. Wu Q, Lu J (2020) Air pollution, individual investors, and stock pricing in China. International Review of Economics & Finance 67:267–287. https://doi.org/10.1016/j.iref.2020.02.001.
9. Fama EF, French KR (2015) A five-factor asset pricing model. J Financ Econ 116:1–22
10. Zizhao He, Yuhuan Zhao & Lu Zheng (2023). How does air pollution affect the stock market performance? Evidence from China, Environmental Science and Pollution Research, Volume 30, pages 70636–70648.
11. Janani, Mohammad Hassan and Soleimani, Hamid. 2015. Investigating the relationship between changes in cash flow statement items and changes in stock returns in companies listed on the Tehran Stock Exchange. Journal of Financial Economics. Number 1, pp. 112-87.[Farsi]
12. Karimzadeh Khosrowshahi, M. Aghababai, M. (1402). Evaluating the long-term relationship between uncertainty of economic policy and excess returns of various industries. Stable Economics, 4(4), 96-126.[Farsi]
13. Aisen, A., & Veiga, F. J. (2013). How does political instability affect economic growth?. European Journal of Political Economy, 29, 151-167.
14. Ebrahimi, M. , and Suri, A. (2008) The relationship between inflation and inflation uncertainty in Iran, Knowledge and Development, Volume 5, Number 18, 111-126[Farsi]
15. Rezaei, N., Nowrozi A. (2018). Investigating economic uncertainty and lending decisions of banks, Investment Knowledge (32) 315-330.[Farsi]
16. Jin, X., & Wu, H. (2021). Economic policy uncertainty and cost stickiness. Management Accounting Research, 52, 100750.
17. Basu, S., Bundick, B., (2017). Uncertainty shocks in a model of effective demand. Econometrica 85 (3), 937–958.
18. Fernandez-Villaverde, J., Guerron-Quintana, P., Kuester, K., Rubio-Ramirez, J., (2015). Fiscal volatility shocks and economic activity. Am. Econ. Rev. 105, 3352–3384.
19. Baker, S., Bloom, N., Davis, S., 2016. Measuring economic policy uncertainty. Q. J. Econ. 131 (4), 1593–1636.
20. Kaviani, M.S., Kryzanowski, L., Maleki, H., Savor, P., 2020. Policy uncertainty and corporate credit spreads. J. financ. econ. 138 (3), 838–865.
21. PÁSTOR, Ľ., & VERONESI, P. (2012). Uncertainty about Government Policy and Stock Prices. The Journal of Finance, 67(4), 1219–1264. http://www.jstor.org/stable/23261358 .
22. Xu A (2022) Air pollution and mediation effects in stock market, longitudinal evidence from China. Int Rev Financ Anal 83. https://doi.org/10.1016/j.irfa.2022.102252.
23. Fama EF, French KR (1993) Common risk-factors in the returns on stocks and bonds. J Financ Econ 33(1):3–56. https://doi.org/10.1016/0304-405X(93)90023-5
24. Saunders EM (1993) Stock prices and Wall Street weather. Am Econ Rev 83:1337–1345
25. Kamstra MJ, Kramer LA, Levi MD (1997) Winter blues: a SAD stock market cycle. Am Econ Rev 93(1):324–343. https://doi.org/10.1257/000282803321455322
26. Loughran T, Schultz P (2004) Weather, stock returns, and the impact of localized trading behavior. J Financ Quant Anal 39(2):343–364. https://doi.org/10.1017/S0022109000003100.
27. Mulatu A, Gerlagh R, Rigby D, Wossink A (2010) Environmental regulation and industry location in Europe. Environ Resource Econ 45(4):459–479. https://doi.org/10.1007/s10640-009-9323-3.
28. Levy T, Yagil J (2011) Air pollution and stock returns in the US. J Econ Psychol 32:374–383. https://doi.org/10.1016/j.joep.2011.01.004.
29. Lepori GM (2016) Air pollution and stock returns: evidence from a natural experiment. J Empir Financ 35:25–42. https://doi.org/10.1016/j.jempfin.2015.10.008.
30. Guo Y, Zhang Y (2016) Does air quality affect the stock market? J Financ Res 2:71–85.
31. Santiago JL, Rivas E, Gamarra AR, Vivanco MG, Buccolieri R, Martilli A, Lechon Y, Martin F (2022) Estimates of population exposure to atmospheric pollution and health-related externalities in a real city: the impact of spatial resolution on the accuracy of results. Sci Total Environ 819. https://doi.org/10.1016/j.scitotenv.2021.152062.
32. Xiao-Ming Li, Mei Qiu. (2023). The joint effects of economic policy uncertainty and firm characteristics on capital structure: Evidence from US firms. Journal of International Money and Finance 110 (2023) 102279
33. Burkhardt J, Bayham J, Wilson A, Carter E, Berman JD, O’Dell K, Ford B, Fischer EV, Pierce JR (2019) The effect of pollution on crime: evidence from data on particulate matter and ozone. J Environ Econ Manag 98. https://doi.org/10.1016/j.jeem.2019.102267.
34. Gan T, Li Y, Jiang Y (2022) The impact of air pollution on venture capital: evidence from China. Environ Sci Pollut Res 29:90615–90631. https://doi.org/10.1007/s11356-022-21972-7.
35. Teng M, He X (2020) Air quality levels, environmental awareness and investor trading behavior: evidence from stock market in China. J Clean Prod 244. https://doi.org/10.1016/j.jclepro.2019.118663.
36. Zhang YH, Tao LF (2019) Haze, investor attention and China’s stock markets: evidence from internet stock forum. Financ Res Lett 31:363–368. https://doi.org/10.1016/j.frl.2018.12.001.
37. Tallon LA, Manjourides J, Pun VC, Salhi C, Suh H (2017) Cognitive impacts of ambient air pollution in the National Social Health and Aging Project (NSHAP) cohort. Environ Int 104:102–109. https://doi.org/10.1016/j.envint.2017.03.019.
38. Huang J, Xu N, Yu H (2020) Pollution and performance: do investors make worse trades on hazy days? Manage Sci 66:4455–4476. https://doi.org/10.1287/mnsc.2019.3402.
39. Taleblo, Reza, Faridzad, Ali and Sheikhi Habil, Hossein. (2018). The effect of macroeconomic variables on stock returns of chemical and petrochemical companies in the framework of the PVAR model. Econometric Modeling, (3)2,186-159. . [Farsi]doi: 10.22075/jem.2018.13077.
40. Amiri, Hossein and Pirdadeh Biranvand, Mehbobe. (2020). Uncertainty of Iran's economic policies and stock market based on the Markov regime change approach. Financial knowledge of securities analysis (financial studies), 12(44), 49-67. [Farsi].https://jfksa.srbiau.ac.ir/article_14945.html .
41. Hemtifar, Fahima and Ranjbar, Mokhtar (2019). Investigating the uncertainty of economic policy and the risk of falling stock prices in two beta levels and the market of companies admitted to the Tehran Stock Exchange market. New research approaches in management sciences, period 3, no. 7, pp. 49-67.[Farsi]
42. Rahmati, Nahid and Ahadi Sarkani, Seyyed Yusuf (1400). Investigating the uncertainty of economic policy on the risk of falling stock prices in companies listed on the Tehran Stock Exchange, Studies in Economics, Financial Management and Accounting, Volume 7, Number 1, pp. 350-365.[Farsi]
43. Hadipour, Hassan, Paftani Eskoui, Seyed Ali, and Rahmani, Kamaluddin. (1400). Factors affecting volatility index in Tehran Stock Exchange. Planning and Budgeting, 26(3), 131-154. [Farsi].dio:10.52547/jpbud.26.3.131
44. Hosseini, Seyed Mehdi and Dadres Moghadam, Amir. (2022). Modeling monetary and financial shocks on stock returns and stock market industries of the country. Review of Iran's Economic Issues, 9(1), 123-159[Farsi] . Dio:10.30465/CE.2022.40994.1777.https://www.sid.ir/paper/176318/fa .
45. Mehrabian, Ali Akbar and Guderzi Farahani, Yazdan. (1400). Investigating the impact of macroeconomic variables on the efficiency of industries in the Tehran Stock Exchange with the approach of generalized moments. Applied Economics (39 (Winter 1400)), 55-73. [Farsi].doi: 10.30495/jae.2022.65126.1397
46. Lalbar, Ali and Hosni, Mohsen and Fallahi, Elaha (1401). The impact of air pollution and environmental factors on the financial performance of industrial companies, Industrial Technology Development, Volume 20, Number 48, pp. 17-34.[Farsi]
47. Costa, M. D., Habib, A., & Bhuiyan, M. B. U. (2023). Financial constraints and asymmetric cost behavior. Journal of Management Control, 32(1), 33-83.
48. Yan Luo, Chenyang Zhan.2020.Economic policy uncertainty and stock price crash risk.Research in International Business and Finance,Volume 51,101112, ISSN 0275- 5319.doi.org/10.1016/j.ribaf.2019.101112.
49. Rousseeuw, P. J., & Leroy, A. M. (2005). Robust regression and outlier detection (Vol. 589). John wiley& sons
50. Koenker, R., & Hallock, K. F. (2001). Quantile regression. Journal of economic perspectives, 15(4), 143- 156.
51. Cevik E, Altinkeski BK, Cevik EI, Dibooglu S (2022) Investor sentiments and stock markets during the COVID-19 pandemic. Financial. Innovation 8(1). https://doi.org/10.1186/s40854-022-00375-0
52. Wu B, Cai Y, Zhang M (2021) Investor sentiment and stock price crash risk in the Chinese stock market. J Math 2021. https://doi.org/10.1155/2021/6806304.
