Political uncertainty, realized volatility, and jumps in the Chinese stock market

Yanhui Jiang, Liang Liu and Yun Hong

Applied Economics Letters, 2021, vol. 28, issue 6, 518-522

Abstract: This study investigates the impact of the local political uncertainty (LPU) on one-step-ahead volatility in the Chinese stock market using high-frequency data. The empirical findings indicate that the LPU generates a significant negative impact on future realized volatility and its continuous and jump components. Further tests show that the LPU’s impact is more pronounced in politically sensitive firms. The study finds that LPU’s negative impact could be explained by its inhibition effect on investors’ trading volume. We also find evidence of institutional investors’ secret buying behaviour during the LPU period.

Date: 2021
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DOI: 10.1080/13504851.2020.1761532

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