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Decomposing uncertainty: How foreign policy risks shape Chinese stock market dynamics

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  • Li, bing
  • Lu, pu
  • Wang, yong

Abstract

This study examines the transmission mechanism of foreign economic policy uncertainty (FEPU) on the Chinese stock market from 1997 to 2022, using a vector autoregressive adaptation of the dividend discount model. By decomposing excess returns into cash flow (CF), excess return (ER), and risk-free rate (RF) components, we disentangle the effects of FEPU shocks on these distinct factors.

Suggested Citation

  • Li, bing & Lu, pu & Wang, yong, 2024. "Decomposing uncertainty: How foreign policy risks shape Chinese stock market dynamics," International Review of Economics & Finance, Elsevier, vol. 96(PB).
    • Handle: RePEc:eee:reveco:v:96:y:2024:i:pb:s1059056024006907
    DOI: 10.1016/j.iref.2024.103698
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    More about this item

    Keywords

    Economic policy uncertainty; Return decomposition; Uncertainty spillover; Policy coordination;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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