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The impact of economic policy uncertainty on household portfolios effectiveness: Evidence from China

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  • Sun, Zhongyu
  • Li, Jun

Abstract

This paper uses the text analysis method to construct the provincial level economic policy uncertainty index in China, and matches the index with China's micro household data to empirically test the impact and mechanism of economic policy uncertainty on the effectiveness of household portfolios. We find that economic policy uncertainty significantly reduces the effectiveness of household portfolios, and reducing risk preference and increasing income risk are important mechanisms. Finally, we also conduct moderating effect analysis and find that marketization, financial development and financial literacy can effectively moderate the impact of economic policy uncertainty on household portfolios.

Suggested Citation

  • Sun, Zhongyu & Li, Jun, 2025. "The impact of economic policy uncertainty on household portfolios effectiveness: Evidence from China," Finance Research Letters, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004787
    DOI: 10.1016/j.frl.2025.107215
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    • G5 - Financial Economics - - Household Finance

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