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Information Dissemination and the Monetary Policy Uncertainty Premium: Evidence from China

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  • Lin, Jianhao
  • Fan, Jiacheng
  • Zhang, Yifan

Abstract

This paper proposes a novel monetary policy uncertainty (MPU) measure aggregating information from policy communication, policy operation and news coverage. We find that the aggregate MPU measure significantly commands a negative risk premium in the cross-section of the Chinese stock market. Stocks with higher (lower) MPU beta, favored (avoided) for hedging against MPU shocks, contribute to the premium through their under-performance (outperformance). Our results remain robust after controlling for economic uncertainty, economic policy uncertainty, and monetary policy surprises. We further show that the aggregate MPU measure outperforms its individual components in both portfolio- and stock-level asset pricing tests.

Suggested Citation

  • Lin, Jianhao & Fan, Jiacheng & Zhang, Yifan, 2025. "Information Dissemination and the Monetary Policy Uncertainty Premium: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 171(C).
  • Handle: RePEc:eee:jbfina:v:171:y:2025:i:c:s0378426624002851
    DOI: 10.1016/j.jbankfin.2024.107371
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    Keywords

    Monetary policy uncertainty; Information dissemination; Asset pricing; Cross-section of stock returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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