Research On The Influence Of Uncertainty Of Economic Policy On China's Stock Market Fluctuation

Although after more than 20 years of development,China's stock market has achieved great development,but China's stock market is still an emerging market,not mature enough,and the national government needs to adopt necessary policies to stabilize the stock market.Because the government's policies are too frequent,the constant changes in policies have led to an increase in internal and external uncertainty,which in turn has increased stock market volatility.The huge fluctuations in the stock market have a major impact on the stability of the national economy.In particular,the big bull market and historical stock market crash between 2014 and 2017 have had a huge impact on China's real economy and investors.Therefore,in this context,it is particularly important to study the impact of China's macroeconomic policy uncertainty on China's stock market volatility,so that it can make scientific suggestions to the Chinese government and make China's stock market truly become an economic “barometer”.This paper not only studies economic policy.The influence of uncertainty on the overall volatility of China's stock market,and on the basis of many related literatures,innovatively studied the influence of economic policy uncertainty on the fluctuations of different styles and different sectors in China's stock market,and better enriched the relevant Field research.The overall idea of this paper is to study the impact of China's economic policy uncertainty fluctuation on the overall volatility of the stock market,and then study the impact of economic policy uncertainty fluctuation on the different styles of the stock market and the fluctuation of different industry sectors.Finally,explore different macroeconomics.How the policy will affect the stock market and do some auxiliary research,so as to draw more scientific conclusions and give corresponding suggestions.Therefore,after analyzing the relevant theories,this paper proposes four hypotheses to be tested.The hypothesis one to be tested is that the increase in the uncertainty of economic policy uncertainty will significantly increase the volatility of China's stock market.To be tested hypothesis 2: The increase in the volatility of economic policy uncertainty will significantly increase the fluctuation of the small-cap stocks in China's stock market.Preliminary hypothesis 3: Uncertainty in economic policy uncertainty has no significant impact on the volatility of certain sectors in China's stock market.To be tested hypothesis 4: loose monetary policy and positive fiscal policy will drive the stock market to rise.In order to study the impact of economic policy uncertainty fluctuation on stock market volatility,this paper uses VAR-GARCH-BEKK model to study the volatility spillover between economic policy uncertainty index and Shanghai Composite Index,national certificate style index and national securities industry index.The effect,in which the economic policy uncertainty index was compiled by Baker et al.,which quantifies China's economic policy uncertainty by identifying relevant vocabulary in the articles published in the South China Morning Post is the most appropriate measure now.index.While studying the specific influence of monetary policy and fiscal policy on stock market changes,this paper mainly adopts VAR model,and studies the changes of currency and fiscal policy on stock market from multiple angles through cointegration test,Granger causality test,impulse response function and variance decomposition.Through empirical analysis,the main conclusions of this paper are as follows: The uncertainty of economic policy has a one-way volatility spillover effect on the stock market as a whole,and the increase of economic policy uncertainty volatility will increase the stock market volatility,but the stock market volatility increases.It will not force the increase in economic policy uncertainty.In terms of style,the stock market is divided into six major styles according to market growth,market value,mid-cap growth,mid-cap value,small-cap growth,and small-cap value.Research has found that economic policy uncertainty fluctuations for large-cap growth,mid-cap Value,small-cap growth,and small-cap value have volatility spillover effects.It can be seen that the increase in economic policy uncertainty fluctuations will indeed significantly increase the fluctuation of large and small stocks.In terms of industries,we study the eight major sectors of the stock market: industry,materials,utilities,finance,energy,consumption,information,and medicine.We find that the uncertainty of economic policy fluctuations will affect the materials,energy,consumption,medicine,and information industries.The stocks have a one-way volatility spillover effect,while the economic policy uncertainty and the three sectors of industry,public utilities,and finance do not have volatility spillover effects,especially the utility industry that is considered to be closely related to policy changes in theoretical analysis.However,it is not obvious to the uncertainty of economic policy.To a certain extent,it shows that the development of China's public utilities industry is gradually becoming healthy and scientific,and is less affected by policy fluctuations.The specific impact of monetary and fiscal policies on stock market changes.Overall,positive monetary and fiscal policies will drive stock market rise.Among them,fiscal expenditures have a greater interpretation of stock market movements.Changes in fiscal expenditures are relative to fixed asset investment and interest rates.In terms of changes,it will have a more significant impact on stock market volatility.Therefore,the author believes that the Chinese government should first strengthen the forward-looking,initiative,stability and sustainability of policy formulation,so that the uncertainty of economic policy is reduced,so as to better play the role of stock market resource allocation.Secondly,the Chinese government should be reasonable.Master the role of monetary and fiscal policies in regulating the stock market,but not too dependent on policy guidance.It is necessary to consider various factors for market regulation.Finally,China should strengthen the establishment and improvement of the stock market system,further improve the market system,introduce more financial innovation products,give full play to the functions of stock market financing and price discovery,and reduce abnormal market volatility.