The effect of economic policy uncertainty on the long-run correlation between crude oil and the U.S. stock markets

We investigate the time-varying long-run correlation of crude oil and U.S. stock markets influenced by the economic policy uncertainty (EPU) index based on the DCC-MIDAS model. We find that EPU has a significant positive influence on the long-run oil-stock correlation. Of the category-specific EPU indices, all have a positive impact on the correlation except the monetary policy uncertainty and national security uncertainty. Moreover, we address that structural changes in the oil-stock correlation can be found during the 2008 global financial crisis.