Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market
Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials se...
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| Format: | Article |
| Language: | English |
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MDPI AG
2021-06-01
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| Series: | Mathematics |
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| Online Access: | https://www.mdpi.com/2227-7390/9/12/1411 |
| _version_ | 1797529793848147968 |
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| author | Xiaqing Su Zhe Liu |
| author_facet | Xiaqing Su Zhe Liu |
| author_sort | Xiaqing Su |
| collection | DOAJ |
| description | Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials sectors are systemically important industries during the sample period. Further research of dynamic analysis shows that each sector acts in a time-varying role in this structure. The results of the GARCH-MIDAS regression indicate that none of the selected EPU indexes has a significant long-term impact on the total volatility spillover of the inter-sector stock market in China. However, the EPUs do affect some sectors’ spillover indexes in the long run, and they are significantly heterogeneous. This paper can provide regulatory suggestions for policymakers and reasonable asset allocation and risk avoidance methods for investors. |
| first_indexed | 2024-03-10T10:19:54Z |
| format | Article |
| id | doaj.art-cf006388921945ccae07d5796f472b81 |
| institution | Directory Open Access Journal |
| issn | 2227-7390 |
| language | English |
| last_indexed | 2024-03-10T10:19:54Z |
| publishDate | 2021-06-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Mathematics |
| spelling | doaj.art-cf006388921945ccae07d5796f472b812023-11-22T00:32:35ZengMDPI AGMathematics2227-73902021-06-01912141110.3390/math9121411Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock MarketXiaqing Su0Zhe Liu1School of Economics, Ocean University of China, Qingdao 266100, ChinaSchool of Economics, Ocean University of China, Qingdao 266100, ChinaFollowing generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, we examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials sectors are systemically important industries during the sample period. Further research of dynamic analysis shows that each sector acts in a time-varying role in this structure. The results of the GARCH-MIDAS regression indicate that none of the selected EPU indexes has a significant long-term impact on the total volatility spillover of the inter-sector stock market in China. However, the EPUs do affect some sectors’ spillover indexes in the long run, and they are significantly heterogeneous. This paper can provide regulatory suggestions for policymakers and reasonable asset allocation and risk avoidance methods for investors.https://www.mdpi.com/2227-7390/9/12/1411financial risksector volatility spilloverdynamic structureeconomic policy uncertaintyGARCH-MIDAS |
| spellingShingle | Xiaqing Su Zhe Liu Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market Mathematics financial risk sector volatility spillover dynamic structure economic policy uncertainty GARCH-MIDAS |
| title | Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market |
| title_full | Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market |
| title_fullStr | Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market |
| title_full_unstemmed | Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market |
| title_short | Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market |
| title_sort | sector volatility spillover and economic policy uncertainty evidence from china s stock market |
| topic | financial risk sector volatility spillover dynamic structure economic policy uncertainty GARCH-MIDAS |
| url | https://www.mdpi.com/2227-7390/9/12/1411 |
| work_keys_str_mv | AT xiaqingsu sectorvolatilityspilloverandeconomicpolicyuncertaintyevidencefromchinasstockmarket AT zheliu sectorvolatilityspilloverandeconomicpolicyuncertaintyevidencefromchinasstockmarket |