Do Uncertain Policies Matter for Stock Markets? Evidence From India and China During Global Crises

This study examines the association between economic policy uncertainty and monthly equity-price returns in India and China from 2003 to 2023. Country-specific dynamic regressions, estimated as autoregressive distributed-lag (ARDL) models and selected as ARDL(1,0), include inflation, interest rates, industrial production, exchange rates, and separate COVID-19 and Russia–Ukraine war interactions. The baseline uncertainty coefficient is not significant at 5% in either country. Inflation acceleration strengthens the negative uncertainty association in India, while the interaction is positive in China. COVID-19 and war interactions differ in India; their equality is not rejected in China. Lagged uncertainty changes do not predict returns in either market. Residual diagnostics indicate non-normality and functional-form limitations. The estimates describe conditional associations and suggest that inflation conditions and the type of crisis matter when assessing uncertainty and equity returns.