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Trade policy uncertainty and its impact on the stock market -evidence from China-US trade conflict

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  • He, Feng
  • Lucey, Brian
  • Wang, Ziwei

Abstract

We study the impact of international trade policy uncertainty (TPU) on equity markets. To capture the current tension in the relationship between China and the US, we use monthly stock market volatility and TPU indices of China and US from 2000 to 2019. By adopting a time-varying VAR model (TVP-SV-VAR), we find that TPU has heterogeneous effects on U.S. and China stock market. U.S. TPU has stronger impact on both U.S. and Chinese stock market. Time-varying characteristics show that U.S. - China trade conflicts have positive effect on U.S. stock market but a negative effect on Chinese stock market.

Suggested Citation

  • He, Feng & Lucey, Brian & Wang, Ziwei, 2021. "Trade policy uncertainty and its impact on the stock market -evidence from China-US trade conflict," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320309715
    DOI: 10.1016/j.frl.2020.101753
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    8. Yu, Mingzhe & Fan, Jiachuan & Wang, Haijun & Wang, Jie, 2023. "US trade policy uncertainty on Chinese agricultural imports and exports: An aggregate and product-level analysis," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 70-83.
    9. Lin, Xiaowei & Ding, Zijun & Chen, Aihua & Shi, Huaizhi, 2022. "Internal whistleblowing and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 84(C).
    10. Kwame Asiam Addey & William Nganje, 2023. "The role of the U.S. exchange‐rate equity market volatility on agricultural exports and forecasts," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 71(1), pages 25-47, March.
    11. Jiahui Chen & Guangyu Nie, 2023. "Valuation Effects of US–China Trade Conflict: The Role of Institutional Investors," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(6), pages 56-78, November.
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