Abstract
AbstractWe examine the pricing implications of monetary policy uncertainty (MPU) in the cross‐section of stock returns in the Chinese stock market. Our results show that the long‐short portfolio that is long stocks with the lowest exposures to innovations in MPU and short stocks with the highest exposures to innovations in MPU earns about 6% annualized alpha. The coskewness, idiosyncratic volatility, size, and book‐to‐market effects cannot account for the low (high) average returns earned by stocks with high (low) exposures to innovations in MPU. Furthermore, the exposure to innovations in MPU commands a significantly negative risk premium in the Fama‐MacBeth regressions. These results indicate that investors have preferences for the early resolution of MPU.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.