IDEAS home Printed from https://ideas.repec.org/a/bla/ecaffa/v43y2023i1p32-52.html
   My bibliography  Save this article

America's decoupling from China: A perspective from stock markets

Author

Listed:
  • Kerry Liu

Abstract

America's decoupling‐from‐China debate started after July 2018, reached its peak in August 2020, and is likely to continue even if it may not be a high priority for the Biden administration. Many studies have examined various aspects of this issue, especially the potential economic impacts on the US economy. Unlike previous research, this study looks at the response of stock markets. Using Google Trends data, this study created a weekly dataset from January 2020 to June 2021 to measure investor sentiment towards the US decoupling from China. Employing the generalised autoregressive conditional heteroskedasticity (GARCH) models, the study finds that concern over decoupling is associated with significant variations in stock market prices. From this we can infer that the overall effects of decoupling on the US economy are likely to be considerable.

Suggested Citation

  • Kerry Liu, 2023. "America's decoupling from China: A perspective from stock markets," Economic Affairs, Wiley Blackwell, vol. 43(1), pages 32-52, February.
    • Handle: RePEc:bla:ecaffa:v:43:y:2023:i:1:p:32-52
    DOI: 10.1111/ecaf.12556
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecaf.12556
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecaf.12556?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. James A Brander & Victor Cui & Ilan Vertinsky, 2017. "China and intellectual property rights: A challenge to the rule of law," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(7), pages 908-921, September.
    2. Kim, Suk-Joong & Nguyen, Do Quoc Tho, 2008. "The reaction of the Australian financial markets to the interest rate news from the Reserve Bank of Australia and the U.S. Fed," Research in International Business and Finance, Elsevier, vol. 22(3), pages 378-395, September.
    3. Kerry Liu, 2022. "China's Reform Spree in 2021: Common Prosperity and Others," Economic Papers, The Economic Society of Australia, vol. 41(3), pages 232-246, September.
    4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    5. Dean Fantazzini, 2014. "Nowcasting and Forecasting the Monthly Food Stamps Data in the US Using Online Search Data," PLOS ONE, Public Library of Science, vol. 9(11), pages 1-27, November.
    6. Sowmya Subramaniam & Madhumita Chakraborty, 2021. "COVID-19 fear index: does it matter for stock market returns?," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 13(1), pages 40-50, March.
    7. Ding Ding & Chong Guan & Calvin M. L. Chan & Wenting Liu, 2020. "Building stock market resilience through digital transformation: using Google trends to analyze the impact of COVID-19 pandemic," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-21, December.
    8. Gao, Zhenyu & Ren, Haohan & Zhang, Bohui, 2020. "Googling Investor Sentiment around the World," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(2), pages 549-580, March.
    9. Hussain, Syed Mujahid, 2011. "Simultaneous monetary policy announcements and international stock markets response: An intraday analysis," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 752-764, March.
    10. Maryam Batool & Huma Ghulam & Muhammad Azmat Hayat & Muhammad Zahid Naeem & Abdullah Ejaz & Zulfiqar Ali Imran & Cristi Spulbar & Ramona Birau & Tiberiu Horațiu Gorun, 2021. "How COVID-19 has shaken the sharing economy? An analysis using Google trends data," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 34(1), pages 2374-2386, January.
    11. Melody Y. Huang & Randall R. Rojas & Patrick D. Convery, 2020. "Forecasting stock market movements using Google Trend searches," Empirical Economics, Springer, vol. 59(6), pages 2821-2839, December.
    12. Christos Ioannidis & Alexandros Kontonikas, 2006. "Monetary Policy and the Stock Market: Some International evidence," Working Papers 2006_12, Business School - Economics, University of Glasgow.
    13. Schwert, G. William, 2003. "Anomalies and market efficiency," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 15, pages 939-974, Elsevier.
    14. Sibley, Steven E. & Wang, Yanchu & Xing, Yuhang & Zhang, Xiaoyan, 2016. "The information content of the sentiment index," Journal of Banking & Finance, Elsevier, vol. 62(C), pages 164-179.
    15. Vo, Xuan Vinh & Tran, Thi Tuan Anh, 2020. "Modelling volatility spillovers from the US equity market to ASEAN stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 59(C).
    16. Zhi Da & Joseph Engelberg & Pengjie Gao, 2015. "Editor's Choice The Sum of All FEARS Investor Sentiment and Asset Prices," The Review of Financial Studies, Society for Financial Studies, vol. 28(1), pages 1-32.
    17. Stoupos, Nikolaos & Kiohos, Apostolos, 2017. "EU unification and linkages among the European currencies: new evidence from the EU and the EEA," Research in International Business and Finance, Elsevier, vol. 41(C), pages 28-36.
    18. Mr. Diego A. Cerdeiro & Rui Mano & Johannes Eugster & Mr. Dirk V Muir & Mr. Shanaka J Peiris, 2021. "Sizing Up the Effects of Technological Decoupling," IMF Working Papers 2021/069, International Monetary Fund.
    19. Wu, Xinyu & Xia, Michelle & Zhang, Huanming, 2020. "Forecasting VaR using realized EGARCH model with skewness and kurtosis," Finance Research Letters, Elsevier, vol. 32(C).
    20. Szczygielski, Jan Jakub & Bwanya, Princess Rutendo & Charteris, Ailie & Brzeszczyński, Janusz, 2021. "The only certainty is uncertainty: An analysis of the impact of COVID-19 uncertainty on regional stock markets," Finance Research Letters, Elsevier, vol. 43(C).
    21. Costola, Michele & Iacopini, Matteo & Santagiustina, Carlo R.M.A., 2021. "Google search volumes and the financial markets during the COVID-19 outbreak," Finance Research Letters, Elsevier, vol. 42(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dash, Saumya Ranjan & Maitra, Debasish, 2022. "The COVID-19 pandemic uncertainty, investor sentiment, and global equity markets: Evidence from the time-frequency co-movements," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    2. María José Ayala & Nicolás Gonzálvez-Gallego & Rocío Arteaga-Sánchez, 2024. "Google search volume index and investor attention in stock market: a systematic review," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-29, December.
    3. Kerry Liu, 2022. "China's Reform Spree in 2021: Common Prosperity and Others," Economic Papers, The Economic Society of Australia, vol. 41(3), pages 232-246, September.
    4. Wang, Wenzhao & Duxbury, Darren, 2021. "Institutional investor sentiment and the mean-variance relationship: Global evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 415-441.
    5. Papadamou, Stephanos & Fassas, Athanasios P. & Kenourgios, Dimitris & Dimitriou, Dimitrios, 2023. "Effects of the first wave of COVID-19 pandemic on implied stock market volatility: International evidence using a google trend measure," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    6. Michele Costola & Michael Donadelli & Luca Gerotto & Ivan Gufler, 2022. "Global risks, the macroeconomy, and asset prices," Empirical Economics, Springer, vol. 63(5), pages 2357-2388, November.
    7. Stéphane Goutte & David Guerreiro & Bilel Sanhaji & Sophie Saglio & Julien Chevallier, 2019. "International Financial Markets," Post-Print halshs-02183053, HAL.
    8. Anastasiou, Dimitris & Ballis, Antonis & Drakos, Konstantinos, 2022. "Constructing a positive sentiment index for COVID-19: Evidence from G20 stock markets," International Review of Financial Analysis, Elsevier, vol. 81(C).
    9. Ung, Sze Nie & Gebka, Bartosz & Anderson, Robert D.J., 2023. "Is sentiment the solution to the risk–return puzzle? A (cautionary) note," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    10. Yensen Ni & Min-Yuh Day & Paoyu Huang, 2020. "Trading stocks following sharp movements in the USDX, GBP/USD, and USD/CNY," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-17, December.
    11. Emre Cevik & Buket Kirci Altinkeski & Emrah Ismail Cevik & Sel Dibooglu, 2022. "Investor sentiments and stock markets during the COVID-19 pandemic," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-34, December.
    12. Lee, Geul & Ryu, Doojin, 2024. "Investor sentiment or information content? A simple test for investor sentiment proxies," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    13. Carlini, Federico & Farina, Vincenzo & Gufler, Ivan & Previtali, Daniele, 2024. "Do stress and overstatement in the news affect the stock market? Evidence from COVID-19 news in The Wall Street Journal," International Review of Financial Analysis, Elsevier, vol. 93(C).
    14. Birru, Justin, 2018. "Day of the week and the cross-section of returns," Journal of Financial Economics, Elsevier, vol. 130(1), pages 182-214.
    15. Blajer-Gołębiewska, Anna & Honecker, Lukas & Nowak, Sabina, 2024. "Investor sentiment response to COVID-19 outbreak-related news: A sectoral analysis of US firms," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    16. Tihana Škrinjarić, 2019. "Time Varying Spillovers between the Online Search Volume and Stock Returns: Case of CESEE Markets," IJFS, MDPI, vol. 7(4), pages 1-30, October.
    17. Yousaf, Imran & Youssef, Manel & Goodell, John W., 2022. "Quantile connectedness between sentiment and financial markets: Evidence from the S&P 500 twitter sentiment index," International Review of Financial Analysis, Elsevier, vol. 83(C).
    18. Vasileiou, Evangelos, 2018. "Is the turn of the month effect an “abnormal normality”? Controversial findings, new patterns and…hidden signs(?)," Research in International Business and Finance, Elsevier, vol. 44(C), pages 153-175.
    19. Trančar Vesna, 2015. "The Effect of the Combination of Different Methods of Stock Analysis on Portfolio Performance," Naše gospodarstvo/Our economy, Sciendo, vol. 61(1), pages 37-50, March.
    20. Park, Cheol-Ho & Irwin, Scott H., 2004. "The Profitability Of Technical Trading Rules In Us Futures Markets: A Data Snooping Free Test," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19011, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecaffa:v:43:y:2023:i:1:p:32-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0265-0665 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.