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

Jianhao Lin, Jiacheng Fan and Yifan Zhang

Journal of Banking & Finance, 2025, vol. 171, issue C

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.

Keywords: Monetary policy uncertainty; Information dissemination; Asset pricing; Cross-section of stock returns (search for similar items in EconPapers)
JEL-codes: D80 G12 G18 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:171:y:2025:i:c:s0378426624002851

DOI: 10.1016/j.jbankfin.2024.107371

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