Time-frequency nexus between COVID-19, economic policy uncertainty and China’s stock market during the COVID-19 period

Abstract

ABSTRACTIt is acknowledged that COVID-19 sentiment influences economic policy uncertainty, which is subsequently reflected in stock market investment decisions, resulting in stock price variations. In this scenario, we attempt to explore the influence of COVID-19 and economic policy uncertainty on China’s stock market using wavelet analysis. The findings of novel wavelet frameworks uncover a bi-directional lead-lag association between COVID-19 sentiment, economic policy uncertainty, and stock market returns in China. In addition, the most pronounced degree of causal associations for the concerned couples occurred in the short and medium-run horizons. Specifically, our results unveil that economic uncertainty and COVID-19 sentiment are the main transmitter of shocks, while the stock market is the recipients of shock spillovers. Our research provides policymakers and market participants with critical insights into the behavior of Chinese stock markets during the COVID-19 crisis.KEYWORDS: Economic policy uncertaintyCOVID-19stock marketwavelet analysisChina Disclosure statementNo potential conflict of interest was reported by the author.Additional informationFundingThis research is funded by the University of Finance-Marketing, Ho Chi Minh City, Vietnam.Notes on contributorsNgo Thai HungNgo Thai Hung graduated PhD in Finance at Corvinus University of Budapest, Hungary. Currently, he works as a lecturer in Finance at University of Finance-Marketing, Ho Chi Minh, Vietnam, where he delivers different finance and economic-related courses. His interest research is primarily concentrated on market integration and the non-linear dynamics of financial prices. He also concerns about macroeconomics, economic and sustainable development. He has published many research papers in refereed journals.