Economic policy uncertainty exposure and stock price bubbles: Evidence from China |
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| Institution: | 1. College of Management and Economics, Tianjin University, China;2. School of Economics and Finance, Massey University, New Zealand;3. School of Finance, Tianjin University of Finance and Economics, China;4. Macquarie Business School, Macquarie University, Australia;1. King''s Business School, King''s College London, Level 1, Bush House, 30 Aldwych, London WC2B 4BG, United Kingdom;2. Department of Finance, CUHK Business School, The Chinese University of Hong Kong, Shatin, NT, Hong Kong, China |
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| Abstract: | We explore the impact of economic policy uncertainty exposure (hereafter, EPU exposure) on stock price bubbles. We find that there exists a significantly positive relationship between EPU exposure and stock price bubbles. This result is still significant after a series of robustness checks. Moreover, the relationship between EPU exposure and bubbles is due to retail investors' speculative trading behavior. In addition, optimistic aggregate states and firms with higher information uncertainty characteristics strengthen the EPU exposure effects. Overall, we provide unique evidence regarding the impact of uncertainty on stock prices. |
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