Assement the long-term relationship between the economic policy uncertainty and the excess returns of various industries index

In the past few years, several major domestics and international challenges have emerged, causing global political and economic uncertainty. Economic uncertainty, defined as the difficulty in predicting the economic environment, arises from various factors such as political instability, changes and uncertainties in government policies, natural disasters, and market fluctuations. The presence of such uncertainties significantly affects the efficiency of markets, including the efficiency of the capital market. The aim of this study is to examine the long-term relationship between of economic policies uncertainty (based on the fluctuations of macroeconomic variables using the composite PCA index) and the excess return of eight different industries index (Automobile and parts manufacturing, Pharmaceutical Products and Materials , cement, lime and gypsum, Multidisciplinary industrial companies , basic metals, oil, coke, and nuclear fuel, coke and nuclear fuels, chemical products, Aggregation, properties and real estate).The investigation, conducted using the econometric ARDL approach over the period from 2012 to 2021, demonstrates that economic policies uncertainty is positively and significantly related to the excess returns of the selected industry index Among the various industries, the Automobile and manufacturing parts industry is most affected by the of economic policies uncertainty, while the construction and real estate industry is least affected. Furthermore, the speed of adjustment of Aggregation, properties and real estate the effect of Economic policy uncertainty on the excess returns of the stock market industries is not homogeneous, as indicated by the ECM coefficient. Automobile and manufacturing parts industry index experiences the fastest adjustment, while the Multidisciplinary industrial companies, due to their diverse portfolios, exhibit the slowest adjustment speed compared to others..