Impact of policy uncertainty on stock market volatility in the China’s low-carbon economy

Liping Liu, Zheng Lü and Seong-Min Yoon

Energy Economics, 2025, vol. 141, issue C

Abstract: High speculation and volatility in China's stock market make enhancing volatility estimation and prediction in green and low-carbon sectors essential to meet the financing demands of the carbon-neutral industry and ensure sustainable development. In this study, we first introduce the CBOE Volatility Index (VIX) into the DAGM model to construct an improved model, DAGM-VIX, to explore the impact of China's Economic Policy Uncertainty (CEPU) and Climate Policy Uncertainty (CPU) on the stock market volatility of China's low-carbon economy. In addition, economic policy uncertainty is further decomposed into related uncertainties such as fiscal policy, monetary policy, trade policy, and exchange rate and capital account policy to explore in depth the heterogeneity of their impacts on stock market volatility of low-carbon economy. The results show that CEPU and CPU have a significant impact on the long-term volatility of China's green and low-carbon industries, and there are differences in the impact of uncertainty on stock market volatility in different policy areas. Compared with original DAGM and GM models, the DAGM-VIX model is superior in its predictive ability, and the DAGM-VIX-CEPU model, in particular, performs particularly well in predicting the volatility of green and low-carbon transition industries.

Keywords: Policy uncertainty; New energy stock market; Low-carbon stock market; DAGM-VIX model (search for similar items in EconPapers)
JEL-codes: C58 G12 G15 Q01 Q54 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988324007655
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:141:y:2025:i:c:s0140988324007655

DOI: 10.1016/j.eneco.2024.108056

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().