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The financial risk concern in China: A powerful predictor of stock market volatility

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  • Li, Zijun
  • Ma, Feng
  • Zhang, Jixiang
  • Zhou, Xiaozhou

Abstract

This paper constructs the financial risk concern (RC) in China based on four primary types of textual sources. We find that the RC is a powerful negative predictor of future stock market volatility, which predictive power is significantly greater than that of other previously examined macroeconomic, risk and uncertainty variables. In the weekly analysis, we observe a reversal in the impact of risk concern on stock market volatility, shifting from positive to negative, which reflects proactive risk-averse by investors and market self-adaptation. We also demonstrate that risk concern has long-term predictive power. In cross-sectional analysis, we find it has a greater impact during periods of low volatility, and particularly affects state-owned enterprises and downstream industries.

Suggested Citation

  • Li, Zijun & Ma, Feng & Zhang, Jixiang & Zhou, Xiaozhou, 2025. "The financial risk concern in China: A powerful predictor of stock market volatility," Research in International Business and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:riibaf:v:80:y:2025:i:c:s0275531925003848
    DOI: 10.1016/j.ribaf.2025.103128
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