Research On The Impact And Mechanism Of Economic Policy Uncertainty On Stock Returns

The uncertainty of the release time of the economic policy,the uncertainty of the specific content of the new policy and the uncertainty of the market reaction to the new policy constitute all the contents of the uncertainty of the economic policy of a country.From 2008 when the US subprime crisis spread to the whole world to the current COVID-19 pandemic,the international financial market is experiencing more hardships than in the past decades.Facing these risks and challenges,policy makers of various countries are also actively implementing various economic policies to intervene and regulate the market to stabilize the operation of the economy.In this context,government intervention in the economy is more frequent than in the past and the intensity of intervention is greatly increased,which to a large extent contributes to the increase in the risk level of economic policy uncertainty.China’s capital market has not fully opened up,and China’s macro-control department has a strong willingness to intervene in the capital market,which leads to a high level of uncertainty in China’s economic policy.Then,will such uncertain risks in China affect the returns of the capital market?In order to answer the above questions,this article first to uncertainty about his economic policy research at home and abroad,found the existing already how uncertainty affects the capital market on economic policy research has not been unified conclusion: studies have considered the uncertain performance bring positive influence to stock market,achieve positive premium;Some studies believe that such uncertainty risk is not conducive to the trend of stock prices in the future,leading to negative premium,but few related studies involve the asymmetric impact of economic policy uncertainty on the stock market.Therefore,discussing the possible asymmetric relationship between the two can enrich the research in this field.Secondly,there are few studies on the transmission mechanism of the relationship between the two,but some scholars have confirmed that investor sentiment can transmit the impact of policy uncertainty on the capital market.However,the management of the company is the actual decision-maker of the company’s operation.,managers’ judgment and behavioral decisions on the market determine the realization of the value of the company.Therefore,managers’ emotions and decision-making behaviors can also become one of the links of the capital market affected by the risk of policy uncertainty.This paper uses panel data of China’s A-share listed companies in Shanghai and Shenzhen from 2007 to 2020,selects the Uncertainty index of China’s economic policy calculated by Baker(2016)according to news reports,and adopts fixed effects model and(2SLS)to conduct empirical analysis on research assumptions.The results show that :(1)there is an asymmetric relationship or threshold effect between economic policy uncertainty and stock returns.Low level of economic policy uncertainty is conducive to the realization of capital market gains,while high level of uncertainty is not conducive to the realization of capital market gains.(2)Managerial sentiment has a mediating effect in the influence mechanism of the two,and is an indirect cause of the asymmetric relationship between economic policy uncertainty and stock returns.When the managerial sentiment quantile is low,uncertainty risk is negatively correlated with stock returns;while when the managerial sentiment quantile is high,uncertainty risk is positively correlated with stock returns.(3)The risk of economic policy uncertainty will affect the emotions of corporate managers,change their investment decisions,and affect the future returns of their stocks.At the end of the paper,the paper puts forward some suggestions based on the research results and the reality of China.