Economic Policy Uncertainty,Market Expectations and Volatility Spillover in Financial Market
Uncertainty is the intrinsic driving force of financial fragility.Thus it's of great policy significance to study the effects of economic policy uncertainty(EPU)on volatility spillover to stabilize market expectations and maintain financial safety across financial markets.Based on the dual perspectives of time and frequency domain,this paper combines DY with BK spillover index to explore the trend and structure features of volatility spillover.Simultaneously,we also analyze the dynamic nonlinear impacts and mechanism of EPU and market expectations when it shocks diverse cyclical structures.It is found that,firstly,the volatility connectedness among financial markets is highly significant and asymmetrical.Spillover-to level is more volatile than spillover-from and stock,derivative and real estate market exhibit their significant role as sources and intermediaries of risk.Secondly,total spillover in the time domain is mainly driven by long-term spillover in the frequency domain,but the weak and flat short-term component in stock,derivative and real estate market is more outstanding.Finally,EPU has a direct positive impact on long-term components and indirect positive impact on short-term spillover through market expectations.Correspondently,our study suggests regulators ought to decrease EPU to stabilize expectations and construct multi-dimensional and differentiated blocking mechanisms for volatility spillover.EPU also needs incorporating into the macro prudential management scheme to guide market expectations and prevent systemic financial risks.
万方数据
维普
