Abstract
This study investigates the effects of stock market uncertainty on economic fundamentals, represented by economic activities and systemic risk, in China. To capture the uncertainty in the Chinese stock market precisely, we use the entropy measure through symbolic time-series analysis. The empirical findings reveal strong spillover effects from stock market uncertainty to economic fundamentals. Specifically, an uncertainty shock generates (i) a short-term decline in industrial production, (ii) a rapid drop and rebound in the composite leading indicator, and (iii) an increase in systemic risk. To understand these findings, we suggest and validate the transmission channel through changes in consumption and investment.
Original language | English |
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Pages (from-to) | 1151-1163 |
Number of pages | 13 |
Journal | Quantitative Finance |
Volume | 19 |
Issue number | 7 |
DOIs | |
Publication status | Published - 2019 Jul 3 |
Bibliographical note
Publisher Copyright:© 2019, © 2019 Informa UK Limited, trading as Taylor & Francis Group.
All Science Journal Classification (ASJC) codes
- Finance
- Economics, Econometrics and Finance(all)