Decomposing uncertainty: How foreign policy risks shape Chinese stock market dynamics

Bing Li, Pu Lu and Yong Wang

International Review of Economics & Finance, 2024, vol. 96, issue PB

Abstract: This study examines the transmission mechanism of foreign economic policy uncertainty (FEPU) on the Chinese stock market from 1997 to 2022, using a vector autoregressive adaptation of the dividend discount model. By decomposing excess returns into cash flow (CF), excess return (ER), and risk-free rate (RF) components, we disentangle the effects of FEPU shocks on these distinct factors.

Keywords: Economic policy uncertainty; Return decomposition; Uncertainty spillover; Policy coordination (search for similar items in EconPapers)
JEL-codes: F62 F66 G12 G15 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pb:s1059056024006907

DOI: 10.1016/j.iref.2024.103698

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