Research On The Dynamic Relationship Between The Uncertainty Of China's Economic Policies And The Stock Prices Of Listed Companies

Stock price,which is one of the most fundamental elements of stock market development,is the reflection of investors' anticipation of a company's operation condition and future benefits.Economic policies will cast influence on investors' expectation and decision through multiple channels,thus cause the fluctuation of stock price.This paper examines the causal relationship between economic policy uncertainty(EPU)and stock prices(SP)in China using both theoretical analysis and empirical ones.For the theoretical part,this paper discusses the transmission mechanism between EPU and SP through monetary policy,fiscal policy and other economic policies that is closely related to stock market.Base on that,we come up with the hypothesis that there's a bidirectional causal relationship between the two.For the empirical part,we examine the causal relationship between EPU and SP in China by using Bootstrap Granger full-sample causality test and sub-sample rolling window estimation.Results show that there do exist a bidirectional causal relationship between EPU and SP.For the direction of the relationship,EPU casts a positive influence on SP and SP also has positive influence on EPU.Hopefully,the theoretical analysis and empirical results of this paper could make contribution to the existing study and provide some favorable suggestions to policy makers,company runners and investors.