Pricing the common stocks in emerging markets: The role of economic policy uncertainty

Orbay Arkol (1) Asil Azimli (2)
(1) Cyprus International University, Northern Cyprus, Cyprus
(2) Cyprus International University, Northern Cyprus, Cyprus


We examine the role of news-based policy uncertainty measures in capturing the cross-section of average stock returns in emerging markets. After controlling for the five established risk factors of Fama and French (FF), we find that policy uncertainty factors are redundant in capturing the average returns of portfolios constructed by considering well-known firm characteristics (size, book-to-market ratio, profitability, and investment). The pricing performance of the five factors model, both statistically and economically, does not improve with the addition of policy uncertainty factors. We argue that the news-based factors' information content is contained in FF risk factors. Our results are robust to additional test statistics and various policy uncertainty factors.

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Orbay Arkol
Asil Azimli (Primary Contact)
Author Biographies

Orbay Arkol, Cyprus International University, Northern Cyprus

Cyprus International University, Haspolat, Northern Cyprus; email:

Asil Azimli, Cyprus International University, Northern Cyprus

Faculty of Economics and Administrative Sciences, Department of Accounting and Finance, Cyprus International University, Haspolat, T.R. North Cyprus via Mersin 10 Turkey; email:

Arkol, O., & Azimli, A. (2024). Pricing the common stocks in emerging markets: The role of economic policy uncertainty. Modern Finance, 2(1), 31–50.

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