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Policy uncertainty and sectoral stock market volatility in China

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  • Si, Deng-Kui
  • Zhao, Bing
  • Li, Xiao-Lin
  • Ding, Hui

Abstract

This study examines the dynamic volatility connectedness between different types of policy uncertainty and sectoral stock markets in both the time and frequency domains in China. Using the time–frequency connectedness index approach, we find extremely high connectedness between policy uncertainty and Chinese sectoral stock markets mainly in the medium and long terms. In particular, uncertainty regarding monetary policies makes the weakest contribution to spillovers among the four policy uncertainties, while uncertainty regarding trade policies contributes prominently. The energy, financial, IT, telecommunication services and utilities sectors are the most vulnerable to policy uncertainties.

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  • Si, Deng-Kui & Zhao, Bing & Li, Xiao-Lin & Ding, Hui, 2021. "Policy uncertainty and sectoral stock market volatility in China," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 557-573.
    • Handle: RePEc:eee:ecanpo:v:69:y:2021:i:c:p:557-573
    DOI: 10.1016/j.eap.2021.01.006
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    Cited by:

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    5. Raza, Syed Ali & Sharif, Arshian & Kumar, Satish & Ahmed, Maiyra, 2023. "Connectedness between monetary policy uncertainty and sectoral stock market returns: Evidence from asymmetric TVP-VAR approach," International Review of Financial Analysis, Elsevier, vol. 90(C).
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    7. Xiao, Jihong & Jiang, Jiajie & Zhang, Yaojie, 2024. "Policy uncertainty, investor sentiment, and good and bad volatilities in the stock market: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    8. Sabani, Nazmie & Bales, Stephan & Burghof, Hans-Peter, 2024. "On the different impact of local and national sources of policy uncertainty on sectoral stock volatility," Research in International Business and Finance, Elsevier, vol. 72(PB).
    9. Zhuo Chen & Bo Yan, 2022. "The impact of trade policy on soybean futures in China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 1152-1163, June.
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    11. Afees Salisu & Sulaiman Salisu & Subair Salisu, 2024. "A news-based economic policy uncertainty index for Nigeria," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(5), pages 4987-5002, October.
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    15. Wu, Hao & Zhu, Huiming & Huang, Fei & Mao, Weifang, 2023. "How does economic policy uncertainty drive time–frequency connectedness across commodity and financial markets?," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
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