Economic Policy Uncertainty,analyst Forecast Deviation And Equity Liquidity

The need for structural transformation of the economy and the complex and severe international form are significantly raising the level of economic policy uncertainty.China’s stock market is closely related to the policy environment,and stock liquidity,as a response to market activity,is one of the criteria to measure the healthy operation of the stock market and will respond to the rising level of economic policy uncertainty.Current domestic and international research mainly focuses on the economic consequences of economic policy uncertainty and the factors.influencing stock liquidity,with fewer scholars studying the two in the same model and even fewer studies on the transmission mechanism between them.Meanwhile,after the stable and prosperous development of China’s securities market in the past three decades,the role of securities analysts as a link between investors and the stock market has become more and more prominent,and their surplus forecasts have received more and more attention from the market.Against the background of rising levels of economic policy uncertainty,it remains to be further studied whether the accuracy and direction of analysts’ own surplus forecasts will be affected and what changes in corporate stock liquidity will occur.This paper examines the direct impact of economic policy uncertainty on stock liquidity by selecting reasonable control variables and constructing a multiple linear regression model with the stocks of A-share listed companies in Shanghai and Shenzhen from 2008-2021.Then,this paper subdivides analyst forecast bias into analyst forecast accuracy and analyst forecast optimism,while investigating the mediating effect played by these two variables in the process of indirect effect of economic policy uncertainty on stock liquidity by means of stepwise regression test coefficient method.Finally,this paper divides the full sample into cyclical and non-cyclical industries by industry type and tests the heterogeneity of the effect of economic policy uncertainty on stock liquidity and the mechanism of action based on this.The findings of this paper are as follows:(1)Overall,the rising level of uncertainty in our economic policies will negatively affect equity liquidity;(2)Economic policy uncertainty makes it more difficult for analysts to make forecasts,which in turn leads to less accurate analysis and higher volatility in market pricing,which in turn affects stock liquidity;(3)economic policy uncertainty significantly reduces analysts’ optimism about the outcome of corporate surplus forecasts,and pessimistic information is transmitted to market participants,resulting in lower stock liquidity;(4)compared with cyclical industries,stock liquidity of firms in non-cyclical industries is more significantly affected by the negative effect of economic policy uncertainty,and the mediating role of analysts’ surplus forecast bias is heterogeneous.The findings of this paper provide a new perspective for understanding the transmission mechanism of economic policy uncertainty affecting stock liquidity,and provide implications for Chinese enterprises in the face of a series of macroeconomic policies adopted by the government,and can provide more theoretical basis for the study of the transmission mechanism of macroeconomic policies acting on the stock market,which has certain significance for the development of China’s capital market and stabilization of the macroeconomy.