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Does innovative monetary policy drive stock market performance? Evidence from SFISF in China

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  • Liu, Xiao
  • Zhang, Yabin
  • Wang, Zhenguo
  • Rao, Qiao
  • Yang, Mengmeng

Abstract

To enhance market liquidity and stabilize the capital market, Chinese authorities announced the Securities, Funds and Insurance Companies Swap Facility (SFISF) on September 24, 2024. Although implementation data on the SFISF remain limited, the announcement itself provides a useful setting for evaluating market reactions. We define our primary estimand as the relative revaluation of pilot firms compared with non-pilot firms around the SFISF announcement. We find a significant relative revaluation premium for pilot firms, and this pattern remains robust after a range of robustness and sensitivity checks. Mechanism analyses point to stock liquidity and investor sentiment as important channels behind this relative revaluation. We also find that the relative revaluation varies systematically with analyst coverage, social security fund ownership, and investor attention. Overall, this paper provides early evidence on how the market priced the announcement of the SFISF and offers a useful benchmark for understanding the market effects of this new stabilization instrument.

Suggested Citation

  • Liu, Xiao & Zhang, Yabin & Wang, Zhenguo & Rao, Qiao & Yang, Mengmeng, 2026. "Does innovative monetary policy drive stock market performance? Evidence from SFISF in China," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 1626-1652.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:1626-1652
    DOI: 10.1016/j.eap.2026.05.017
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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