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How do investors in Chinese stock market react to external uncertainty? An event study to the Sino-US disputes

Xin Gu, Weiqiang Zhang and Sang Cheng

Pacific-Basin Finance Journal, 2021, vol. 68, issue C

Abstract: This paper examines the impact of the Sino-US trade and non-trade disputes on Chinese stock market. By employing the event study methodology, we investigate the abnormal returns in Chinese stock market and identify the actions which are in favor of and against bilateral relations between US and China. We find that: (1) The negative actions of the United States and positive actions of China exert significant negative effects on Chinese stock market, while the positive actions of the United States and negative moves of China are opposite. (2) The effects of Sino-US non-trade disputes are similar to that of trade disputes, but the impact of non-trade disputes is statistically significantly greater than that of trade disputes. (3) China's moves incur a greater impact than the United States. We also find that most of the industries affected by the US actions are directly sanctioned by the United States, such as media, computer application and computer and electronic equipment industries, while the industries affected by China's actions are mostly related to people's livelihood such as energy, media, food, beverage and tobacco and utility industries. Our findings are statistically robust and have economic significance for investors to make trading strategies and Chinese policy makers to maintain financial market stability.

Keywords: Sino-US disputes; Uncertainty; Stock markets; Event study (search for similar items in EconPapers)
JEL-codes: F51 G14 G40 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001219

DOI: 10.1016/j.pacfin.2021.101614

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