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Volatility characteristics of stock markets during the US-China trade war

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  • Yang, Ting

Abstract

This study investigates the effect of the US-China trade war on stock market volatility. Utilizing daily data from the Dow Jones Industrial Average (DJI), NASDAQ (IXIC), Shanghai Stock Exchange (SSEC), and Shenzhen Stock Exchange (SZI) from March 2, 2016 to March 24, 2020, with the trade war commencing on March 23, 2018. GARCH, TGARCH, and EGARCH models are used in the analysis to evaluate volatility dynamics. The study reveals: Firstly, the ARCH effect varies across different stock indexes following the trade war. Secondly, the GARCH effect of stock indexes has significantly increased after the trade war. Lastly, the trade conflict has notably heightened market volatility in both countries, with investors demonstrating stronger reactions to negative news. The study concludes with policy recommendations aimed at mitigating this volatility and enhancing the management of investor responses.

Suggested Citation

  • Yang, Ting, 2025. "Volatility characteristics of stock markets during the US-China trade war," International Review of Economics & Finance, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025004988
    DOI: 10.1016/j.iref.2025.104335
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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