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US economic policy uncertainty and co-movements between Chinese and US stock markets

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  • Li, Xiao-Ming
  • Peng, Lu

Abstract

This paper investigates the impact of innovations in US economic policy uncertainty on the co-movements of China's A/B stock markets with the US stock market. We show that it is the absolute changes in the US economic policy uncertainty index that have a negative impact on the co-movements. The finding is robust to the asymmetric effects of non-policy-uncertainty shocks, to a break in the correlation structure, and to the four Chinese A/B stock markets investigated. Our results provide the first evidence regarding how stock market correlations are driven by policy-related uncertainty shocks in the international context.

Suggested Citation

  • Li, Xiao-Ming & Peng, Lu, 2017. "US economic policy uncertainty and co-movements between Chinese and US stock markets," Economic Modelling, Elsevier, vol. 61(C), pages 27-39.
    • Handle: RePEc:eee:ecmode:v:61:y:2017:i:c:p:27-39
    DOI: 10.1016/j.econmod.2016.11.019
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    More about this item

    Keywords

    Economic policy uncertainty shocks; International stock market co-movements; China; U.S.;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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