The Time-Frequency-Quantile Causal İmpact of Cable News-Based Economic Policy Uncertainty on Major Assets Returns

Abstract

After the collapse of the equity market in the early 2000s, the question of the drivers of financial assets returns preoccupied the interest of investors and policymakers in financial markets. Thus, this study explores how newly developed Cable News-based Economic Policy Uncertainty (TVEPU) predicts major assets returns using daily data from 1 January 2014 to 30 September 2023. To achieve this objective, we introduced the Rolling Windows Wavelet Quantile Granger Causality (RWWQGC) test. The empirical results show that TVEPU tends to have predictive power for SP500 across time, frequency, and quantile. The results also show that TVEPU has a strong causal impact on major financial assets returns across time, frequency, and quantile. However, the predictive power of TVEPU for the US 10-year bond, US dollar index, and Bitcoin is weak across time, frequency, and quantile. Based on these results, policy recommendations are offered.