An Empirical Study on the Impact of Policy on Stock Volatility of Construction Materials

Abstract

In recent years, China’s traditional manufacturing industry has been facing a situation of transformation, resulting in frequent fluctuations in its stock prices. As a representative of the traditional manufacturing industry, the stock prices of the Construction Materials industry are often linked with policies. Therefore, it is essential to explore how policies affect the Construction Materials stocks. In this paper, the Iterative Cumulative Sums of Squares (ICSS) method is used to examine the daily rate of return of the CNI Construction Materials index between January 2015 and July 2021 to find the structural breakpoints. Then compare the effects of different policies according to the characteristics of stock volatility based on the Garch model with dummy variables and connect it with related policies. Besides, the CNI coal index and Real Estate index are introduced into the ADL regression model to explore the influence of other industrial policies on the Construction Materials industry. The results show that, firstly, energy conservation and green supervision to eliminate enterprises with backward production capacity can effectively reduce Construction Materials stocks' volatility. Second, the persistence of stock price fluctuations in the Construction Materials industry is significantly related to the abrupt changes caused by policies. Third, boosting the real estate price can increase the stock price of Construction Materials but increase the volatility, while raising the coal price forces the Construction Materials industry to transform to clean energy, and energy-saving is conducive to the steady growth of the stock price.