How EPU drives long-term industry beta

- Estimating long-term industry beta driven by EPU based on the MIDAS framework.
- The related industries are more driven by EPU before, rather than during, turmoil.
- EPU drives less the beta of industries fundamentally serving the economic activity.
- The category EPU with specific purpose drives more industries only during turmoil.
- The categories related more fundamentally to the economy are more explanatory.

Based on the DCC-MIDAS framework, we estimate the long-term beta of 10 industries driven by Economic Policy Uncertainty (EPU) in the US. The results demonstrate that EPU significantly drives industry beta. The driving effects on different industries are further analyzed along with the related stock market turmoil. The effects of 10 categories of specific EPU on industries' beta are also presented. The findings help to characterize the systematic risk of industries facing different categories of economic policy uncertainty.