Economic policy uncertainty dispersion and excess returns: Evidence from China

Jianlei Yang, Chunpeng Yang and Xiaoyi Hu

Finance Research Letters, 2021, vol. 40, issue C

Abstract: Using the daily economic policy uncertainty (EPU) index of Huang and Luk (2020), we construct an economic policy uncertainty dispersion (EPUD) index and further examine its impact on portfolio excess returns in the Chinese stock markets over the period 2000-2019. Our empirical findings reveal that the EPUD index positively predicts subsequent portfolio excess returns. This effect remains significant as we control for realized volatility, turnover ratio and a variety of macro-economic variables. Besides, we show that the impact of EPUD is stronger in small-stock portfolios.

Keywords: Economic policy uncertainty; Economic policy uncertainty dispersion; Excess returns; Chinese stock markets (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320307820

DOI: 10.1016/j.frl.2020.101714

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