The impact of economic policy uncertainty on household portfolios effectiveness: Evidence from China

Zhongyu Sun and Jun Li

Finance Research Letters, 2025, vol. 78, issue C

Abstract: This paper uses the text analysis method to construct the provincial level economic policy uncertainty index in China, and matches the index with China's micro household data to empirically test the impact and mechanism of economic policy uncertainty on the effectiveness of household portfolios. We find that economic policy uncertainty significantly reduces the effectiveness of household portfolios, and reducing risk preference and increasing income risk are important mechanisms. Finally, we also conduct moderating effect analysis and find that marketization, financial development and financial literacy can effectively moderate the impact of economic policy uncertainty on household portfolios.

Keywords: Economic policy uncertainty; Household portfolios effectiveness; Risk preference; Income risk (search for similar items in EconPapers)
JEL-codes: G5 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004787

DOI: 10.1016/j.frl.2025.107215

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