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Asymmetric volatility spillovers between economic policy uncertainty and stock markets: Evidence from China

Wang, Ziwei; Li, Youwei; He, Feng

Authors

Ziwei Wang

Feng He



Abstract

This study explores the spillovers between economic policy uncertainty (EPU) and stock market realized volatility (RV). The monthly index of Chinese and US EPU and RV are used to analyze the pairwise directional spillovers. We find that RV is a net receiver that is more vulnerable to shocks from U.S. EPU than to shocks from Chinese EPU. We further decompose the RV into good and bad volatility to test the asymmetric spillover effect between the stock market and EPU. The results suggest that EPU has a bigger effect on bad volatility in the stock market throughout most of the sample period. However, we find that good volatility spillovers become larger during periods of stimulated reform, whereas bad volatility spillovers become larger during periods of international disputes. We show that Chinese stock market volatility is sensitive to both U.S. and Chinese EPU and that the spillover is asymmetric in different periods.

Journal Article Type Article
Publication Date 2020-10
Journal Research in International Business and Finance
Print ISSN 0275-5319
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 53
Article Number 101233
APA6 Citation Wang, Z., Li, Y., & He, F. (2020). Asymmetric volatility spillovers between economic policy uncertainty and stock markets: Evidence from China. Research in international business and finance, 53, https://doi.org/10.1016/j.ribaf.2020.101233
DOI https://doi.org/10.1016/j.ribaf.2020.101233
Keywords Economic policy uncertainty; Realized volatility; Asymmetry spillover; Good and bad volatility
Publisher URL https://www.sciencedirect.com/science/article/abs/pii/S0275531919309419?via%3Dihub

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This file is under embargo until Oct 9, 2021 due to copyright reasons.

Contact Youwei.Li@hull.ac.uk to request a copy for personal use.




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