Does economic policy uncertainty impact the mean–variance relation? Evidence from China

Yang, Jianlei; Yang, Chunpeng

doi:10.1080/00036846.2021.1883526

Cited by 4 publications

(5 citation statements)

References 33 publications

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“…The average and standard deviation of FEPU are À1.2049 and 7.0066, respectively. The difference between EPU and FEPU is similar to those of China in Yang and Yang (2021). The mean and standard deviation of FVOV are smaller than those of VOV.…”

Section: Data Descriptionsupporting

confidence: 49%

“…Along with Yang and Yang (2021), we expect high EPU to distort the positive meanvariance relationship. EPU increases investors' uncertainty aversions and risk perceptions and changes in the firm's fundamental information [4].…”

Section: Introductionmentioning

confidence: 95%

“…1. Prior literature including Baker et al (2016Baker et al ( , 2020, Gulen and Ion (2016), Mueller et al (2017), Sharif et al (2020), Jiang and Kim (2021), Kim (2021) and Yang and Yang (2021) utilizes EPU as the measure of policy-or economic-related uncertainty.…”

Section: Notesmentioning

confidence: 99%

“…4. A detailed explanation for the investor channels is available in Section 2 of Yang and Yang (2021).…”

Section: Notesmentioning

confidence: 99%

“…Since uncertainty plays an important role in asset pricing, some literature explores the effect of uncertainty on the mean-variance relationship. Yang and Yang (2021) show the impact of EPU on the mean-variance relationship in the Chinese stock market. They find that the stock market's excess return is positively (negatively) related to conditional variance during low (high) EPU periods.…”

Section: Introductionmentioning

confidence: 99%

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Mean–variance relationship and uncertainty

Kim

2021

JDQS

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This study investigates the impact of uncertainty on the mean-variance relationship. We find that the stock market's expected excess return is positively related to the market's conditional variances and implied variance during low uncertainty periods but unrelated or negatively related to conditional variances and implied variance during high uncertainty periods. Our empirical evidence is consistent with investors' attitudes toward uncertainty and risk, firms' fundamentals and leverage effects varying with uncertainty. Additionally, we discover that the negative relationship between returns and contemporaneous innovations of conditional variance and the positive relationship between returns and contemporaneous innovations of implied variance are significant during low uncertainty periods. Furthermore, our results are robust to changing the base assets to mimic the uncertainty factor and removing the effect of investor sentiment.

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Section: Data Descriptionsupporting

confidence: 49%

Section: Introductionmentioning

confidence: 95%