Dynamic relationships among climate policy uncertainty, investor sentiment and stock price synchronicity-- empirical research based on TVP-SV-VAR model

Using monthly data for China from March 2003 to December 2022, we examine the relationship between climate policy uncertainty (CPU), investor sentiment (IS), and stock price synchronicity (SYN) based on a time-varying parameter stochastic volatility vector autoregression (TVP-SV-VAR) model. The findings reveal that: (1) A time-varying correlation exists among these variables, with the impact of CPU on IS shifting from negative to positive after the signing of the Paris Agreement in 2016. (2) SYN can be collectively influenced by IS and CPU shocks, with time-varying impulse responses showing notable fluctuations with alternating positive and negative values. In most periods, CPU and IS negatively affect SYN in the short and long term. They exhibit similar influencing patterns at specific time points, though the magnitude of their impacts varies. (3) The impact of CPU on the SYN across different industries is heterogeneous, with this effect manifesting earlier and more intensely in the clean energy sector. These findings provide valuable practical insights into the relationship between macro-level CPU and micro-level investor behavior, as well as their combined impact on stock market information efficiency.