Abstract
We propose a dynamic mixture Copula with time-varying weight, which is endowed with generalized autoregressive score dynamics. Based on this model, we portray the lower-tail dependence between the return of WIND first-level industry and CSI-300 index as a proxy variable for the industry risk in China’s stock market, and use the VAR-GARCH-in-mean model based on BEKK-GARCH to deconstruct the different impact of the economic policy uncertainty (EPU) on industry risk of the first and second moments in terms of four policy categories, namely fiscal policy, monetary policy, trade policy, and foreign exchange rate and capital account policy. The results are followed. Firstly, the risk of Consumer Discretionary is averagely the highest, while the risk of Utilities remains the lowest. Secondly, category-specific EPU has no significant mean spillover to the risk of overall industries, while the variance spillover is significant for all the cases. Thirdly, except for Real Estate, the GARCH-in-mean effect is not significant of EPU on industry risks. Further more, all those three kinds of impact show industrial heterogeneities. To avoid systemic risks, we advise that the issue of economic policy should be forward-looking, consistent, and targeted, especially for sensitive industries.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: The North American Journal of Economics and Finance
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.
