How do composite and categorical economic policy uncertainties affect the long-term correlation between China's stock and conventional/green bond markets?

Yaoqi Guo, Yiwen Deng and Hongwei Zhang

Finance Research Letters, 2023, vol. 57, issue C

Abstract: Since China's financial market is characterized by an obvious "policy market", this research explores the impact of composite economic policy uncertainty (EPU) and categorical economic policy uncertainty indices (FPU, MPU, TPU and EXRPU) on Chinese stocks and conventional/green bonds based on the extended DCC-MIDAS model. The results show that the composite EPU index strengthens the long-term correlation between stocks and green bonds while weakening the stock-conventional bond correlation. In addition, the effects of FPU, MPU, TPU and EXRPU on long-term correlations are heterogeneous in terms of size, direction, and significance.

Keywords: Economic policy uncertainty; DCC-MIDAS; Stock; Conventional/Green bond; Long-term correlation (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323005202

DOI: 10.1016/j.frl.2023.104148

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