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Political uncertainty, realized volatility, and jumps in the Chinese stock market

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  • Yanhui Jiang
  • Liang Liu
  • Yun Hong

Abstract

This study investigates the impact of the local political uncertainty (LPU) on one-step-ahead volatility in the Chinese stock market using high-frequency data. The empirical findings indicate that the LPU generates a significant negative impact on future realized volatility and its continuous and jump components. Further tests show that the LPU’s impact is more pronounced in politically sensitive firms. The study finds that LPU’s negative impact could be explained by its inhibition effect on investors’ trading volume. We also find evidence of institutional investors’ secret buying behaviour during the LPU period.

Suggested Citation

  • Yanhui Jiang & Liang Liu & Yun Hong, 2021. "Political uncertainty, realized volatility, and jumps in the Chinese stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 28(6), pages 518-522, March.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:6:p:518-522
    DOI: 10.1080/13504851.2020.1761532
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