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<p>This paper examines the relationship between Economic Policy Uncertainty (EPU) and stock market returns in major European economies, using the COVID-19 pandemic as a structural break. Analyzing data from March 2001 to January 2025 with wavelet techniques, we find a persistent, multi-frequency relationship. Our core result shows that the apparent impact of both COVID-19 and local EPU on peripheral European markets is substantially mediated by spillovers from Germany’s EPU, identifying Germany as a central transmission node. Furthermore, the lead-lag dynamics between uncertainty and returns vary significantly across investment horizons. An extended frequency decomposition reveals that high- and low-frequency components alter the phase relationship, both with and without the COVID-19 variable. We conclude that the EPU-stock return nexus is a complex, frequency-dependent phenomenon, heavily influenced by regional uncertainty spillovers.</p>

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COVID-19, economic policy uncertainty and stock returns in selected European countries: a wavelet analysis

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2026年3月24日

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  • Eugene Kouassi,
  • Pamphile Mezui Mbeng,
  • Loukou Landry Eric Yobouet,
  • Jean-Paul Tchankam,
  • Oluyele Akinkugbe

摘要

This paper examines the relationship between Economic Policy Uncertainty (EPU) and stock market returns in major European economies, using the COVID-19 pandemic as a structural break. Analyzing data from March 2001 to January 2025 with wavelet techniques, we find a persistent, multi-frequency relationship. Our core result shows that the apparent impact of both COVID-19 and local EPU on peripheral European markets is substantially mediated by spillovers from Germany’s EPU, identifying Germany as a central transmission node. Furthermore, the lead-lag dynamics between uncertainty and returns vary significantly across investment horizons. An extended frequency decomposition reveals that high- and low-frequency components alter the phase relationship, both with and without the COVID-19 variable. We conclude that the EPU-stock return nexus is a complex, frequency-dependent phenomenon, heavily influenced by regional uncertainty spillovers.