Economic Policy Uncertainty and Stock Risk Features

Guojin Chen, Runze Zhang, Xiangqin Zhao

PDF(880 KB)
PDF(880 KB)
Front. Econ. China ›› 2019, Vol. 14 ›› Issue (3) : 461-495. DOI: 10.3868/s060-008-019-0020-4
Orginal Article
Orginal Article

Economic Policy Uncertainty and Stock Risk Features

Author information +
History +

Abstract

In this paper, we introduce economic policy uncertainty by using a stochastic discount model. Via parameter calibration and static analysis, we investigate the dynamic characteristics of stock risk on different policy uncertainty. On this basis, we test the channel through policy uncertainty affects stock risk by empirical simulation, and the effect of policy uncertainty on stock risk formation by portfolio analysis, in order to verify the applicability of the theoretical model in China. Finally, the panel model is used to quantitatively analyze the relationship between policy uncertainty and stock risk. The results show that policy uncertainty can inereuse stock risk through enterprise cash flow, discounting factors and correlation coefficient. The effect is still significant after controlling traditional risk factors, corporate heterogeneity, and external environmental factors. Companies that are non-state-owned, have lower returns on invested capital and lower asset growth rate manifest greater stock risk when policy uncertainty is higher. The magnitude of the effect of policy uncertainty on stock risk is larger when the economy is weaker and the policy environment is more unstable.

Keywords

economic policy uncertainty (EPU) / stock risk / transmission mechanism / panel regression

Cite this article

Download citation ▾
Guojin Chen, Runze Zhang, Xiangqin Zhao. Economic Policy Uncertainty and Stock Risk Features. Front. Econ. China, 2019, 14(3): 461‒495 https://doi.org/10.3868/s060-008-019-0020-4

RIGHTS & PERMISSIONS

2019 Higher Education Press
PDF(880 KB)

Accesses

Citations

Detail

Sections
Recommended

/