 Chinese economic policy uncertainty and U.S. households' portfolio decisionsKiryoung Lee, Yoontae Jeon and Chanik Jo Pacific-Basin Finance Journal, 2020, vol. 64, issue C Abstract: We find that U.S. households reduce their exposure to the stock market in response to an increase in the economic policy uncertainty (EPU) of not only U.S., but also to an increase in the Chinese EPU. We identify income uncertainty as a key driver of this relationship. In response to an increase in the Chinese EPU, households whose jobs belong to the industries that heavily exports to China react more sensitively by lowering their stock shares in financial wealth. Moreover, the response is stronger for households in states that export to China more than other states. These evidences suggest that U.S. households respond to the Chinese EPU because an increase in the Chinese EPU potentially increases their income uncertainty. Our findings provide the first evidence on the importance of considering foreign economic policy uncertainty in explaining households' portfolio decisions. Keywords: Economic policy uncertainty; Portfolio choice; Stock market participation; Labor income risk; Foreign economic policy uncertainty (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x20304510 DOI: 10.1016/j.pacfin.2020.101452 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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