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Economic policy uncertainty and stock price informativeness

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  • Tang, Liang
  • Wan, Xiangyu

Abstract

Will economic policy uncertainty enhance stock price informativeness? Due to information and expected concerns, investors will consider policy uncertainty as risk. We examine the effect of policy uncertainty on firms' stock price informativeness and find a positive association. For expected economic policy uncertainty, the effect is weak and insignificant. Unexpected economic policy uncertainty is mainly affecting the stock price informativeness and institution investor behaviors are the reason for stock price informativeness increase. This association mainly exists in firms with private ownership, centralized equity, and smaller financial risk listed companies. We conclude that the policy uncertainty increases the stock price informativeness. The conclusions have theoretical and practical significance for finance market governance and corporate strategy.

Suggested Citation

  • Tang, Liang & Wan, Xiangyu, 2022. "Economic policy uncertainty and stock price informativeness," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:pacfin:v:75:y:2022:i:c:s0927538x22001512
    DOI: 10.1016/j.pacfin.2022.101856
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    Cited by:

    1. Guo, Yaoqi & Deng, Yiwen & Zhang, Hongwei, 2023. "How do composite and categorical economic policy uncertainties affect the long-term correlation between China's stock and conventional/green bond markets?," Finance Research Letters, Elsevier, vol. 57(C).
    2. Fulgence, Samuel & Kwabi, Frank & Boateng, Agyenim & Hu, Wansu & Paudyal, Krishna, 2023. "Cross-country analysis of the effects of political uncertainty on stock price informativeness," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    3. Faheem Aslam & Paulo Ferreira & Haider Ali & Arifa & Márcia Oliveira, 2023. "Islamic vs. Conventional Equity Markets: A Multifractal Cross-Correlation Analysis with Economic Policy Uncertainty," Economies, MDPI, vol. 11(1), pages 1-18, January.
    4. Shrestha, Keshab & Naysary, Babak, 2023. "ESG and economic policy uncertainty: A wavelet application," Finance Research Letters, Elsevier, vol. 58(PD).
    5. Xie, Tao & Li, Yanan, 2023. "Political connections, institutional environment and informativeness of stock price," Finance Research Letters, Elsevier, vol. 55(PA).
    6. Kaihua Wang, 2024. "Economic policy uncertainty and green finance: evidence from frequency and quantile aspects," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-26, February.

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    More about this item

    Keywords

    Economic policy uncertainty; Stock Price Informativeness; Corporate governance; Institution shareholder ratio;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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