Trade Policy Uncertainty and Stock Returns

Federico Esposito, Marcelo Bianconi and Marco Sammon

MPRA Paper from University Library of Munich, Germany

Abstract: We examine how trade policy uncertainty is reflected in stock returns. Our identification strategy exploits quasi-experimental variation in exposure to trade policy uncertainty arising from Congressional votes to revoke China's preferential tariff treatment between 1990 and 2001. More exposed industries commanded a risk premium of 6% per year. The risk premium was larger in sectors less protected from globalization, and more reliant on inputs from China. More exposed industries also had a larger drop in stock prices when the uncertainty began, and more volatile returns around key policy dates. Moreover, the effects of policy uncertainty on expected cash-flows, investors' forecast errors, and import competition from China cannot explain our results.

Keywords: Trade policy; uncertainty; risk premium; China shock (search for similar items in EconPapers)
JEL-codes: F1 F60 G10 (search for similar items in EconPapers)
Date: 2020-04-02
New Economics Papers: this item is included in nep-fmk, nep-gen, nep-int and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/99874/1/MPRA_paper_99874.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/111638/12/MPRA_paper_111638.pdf revised version (application/pdf)

Related works:
Journal Article: Trade policy uncertainty and stock returns (2021)
Working Paper: Trade Policy Uncertainty and Stock Returns (2020)
Working Paper: Trade Policy Uncertainty and Stock Returns (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99874

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