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Financial stabilization policy, market sentiment, and stock market returns

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  • Yang, Jianlei

Abstract

This study examines the responses of market sentiment and stock market returns in China during expansionary policy announcements released by the financial stability and development committee (FSDC). The results suggest that the expansionary financial stabilization policy has significant and positive impacts on stock markets in both a direct way and an indirect way through the market sentiment channel. The mediation analysis further confirms market sentiment as the significant mediator in transmitting the impact of the FSDC policy to stock markets. Moreover, the predictive power of market sentiment significantly increases during the FSDC policy announcements.

Suggested Citation

  • Yang, Jianlei, 2023. "Financial stabilization policy, market sentiment, and stock market returns," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322005566
    DOI: 10.1016/j.frl.2022.103379
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    2. Mohammed, Kamel Si & Obeid, Hassan & Oueslati, Karim & Kaabia, Olfa, 2023. "Investor sentiments, economic policy uncertainty, US interest rates, and financial assets: Examining their interdependence over time," Finance Research Letters, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Financial stabilization policy; Market sentiment; Stock market returns; Event study;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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