Economy & PolicyExtended setexperimental liveNew

Epu Shock Defensives Long

Updated dailyData needs: lowlong only
paper
2016
Source
Baker, S.R., Bloom, N., Davis, S.J. (2016). "Measuring Economic Policy Uncertainty." Quarterly Journal of Economics, 131(4), 1593-1636.
Read the paper →

In plain terms

When the Economic Policy Uncertainty index spikes more than 1 standard deviation above its yearly average, investors rotate into defensive stocks (utilities, staples, gold). Go long the defensive basket for 1-3 months.

How it works

When the Baker-Bloom-Davis EPU index spikes (z > 1.0 vs trailing year), uncertainty-averse investors rotate from cyclical equities toward defensives. The defensive basket (utilities, consumer staples, gold proxies) outperforms by ~2-5% over 30-60 days post-shock.

No live results for this strategy yet. Charts appear once it has earned a top spot on at least one stock, either on its own or as part of a blend of several strategies.
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Data dependencies

  • Daily prices

    Adjusted-close OHLCV for every US-listed ticker; primary price feed.

  • Epu index

    A data feed this strategy reads, refreshed on its normal schedule.

Expected edge

Reported return
+2-5% over 30-60d
Tested over
T+1 to T+60d

+2-5% over 30-60d on defensive basket post-EPU spike (BBD 2016).

Example tickers where this is likely to fire

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

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For informational and educational purposes only. Not financial advice. Learn more