The impact of the economic policy index on the stock market

Subject. The article discusses the Economic Policy Uncertainty Index and the stock index. Objectives. The study aims to assess the impact of the Economic Policy Uncertainty Index (EPU) on the stock market based on official and unofficial sources of information. Methods. We calculated the EPU Index on the basis of a standard and modified methodology with the inclusion of additional economic terms. The method to obtain the index consists of analyzing the vocabulary of news publications and searching for words from dictionaries. The index is the ratio of the number of words found in the dictionary to the total number of words in the text, thus, the size of the text itself does not matter. Results. Based on the use of GARCH modeling, we revealed that fluctuations in the price of Brent crude oil have the greatest impact on the Moscow Exchange Index. At the same time, all variables of the EPU Index (official and unofficial sources) turned out to be statistically significant. The results of the study confirmed the hypothesis about the impact of the EPU Index on the stock market. Conclusions. The findings can be used by investors to make timely investment decisions depending on changes in the EPU Index, which will minimize the negative effects of changes in economic uncertainty and ensure the sustainability of investing in a portfolio of securities or investment projects (businesses) in the long run.