Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model
This study employs the economic policy uncertainty index to gauge the level of economic policy uncertainty in China. Utilizing textual data from the growth enterprise market internet community, we construct the growth enterprise market investor sentiment index by applying the deep learning ERNIE (En...
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MDPI AG
2024-10-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | https://www.mdpi.com/2227-7072/12/4/108 |
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| author | Junxiao Gui Nathee Naktnasukanjn Xi Yu Siva Shankar Ramasamy |
| author_facet | Junxiao Gui Nathee Naktnasukanjn Xi Yu Siva Shankar Ramasamy |
| author_sort | Junxiao Gui |
| collection | DOAJ |
| description | This study employs the economic policy uncertainty index to gauge the level of economic policy uncertainty in China. Utilizing textual data from the growth enterprise market internet community, we construct the growth enterprise market investor sentiment index by applying the deep learning ERNIE (Enhanced Representation through Knowledge Integration) model, thereby capturing investors’ sentiment within the growth enterprise market. The dynamic interplay between economic policy uncertainty, investor sentiment, and returns of the growth enterprise market is scrutinized via the TVP-SV-VAR (time-varying parameter stochastic volatility vector auto-regression) model, and the asymmetric response of different industries’ stock returns within the growth enterprise market to economic policy uncertainty and investor sentiment shock. The findings of this research are that economic policy uncertainty exerts a negative influence on both investor sentiment and returns of the growth enterprise market. While it may trigger a temporary decline in stock prices, the empirical evidence suggests that the impact is of short duration. The influence of investor sentiment on the growth enterprise market returns is characterized by a reversal effect, suggesting that improved sentiment may initially boost stock prices but could lead to a subsequent decline over the long term. The relationship between economic policy uncertainty, investor sentiment, and returns of the growth enterprise market is time-variant, with heightened sensitivity observed during bull markets. Lastly, the effects of economic policy uncertainty and investor sentiment on the returns of different industries within the growth enterprise market are found to be asymmetric. These conclusions contribute to the existing body of literature on the Chinese capital market, offering a deeper understanding of the complex dynamics and the factors influencing market behavior. |
| format | Article |
| id | doaj-art-632daef1f8c84bf2adaa03680bbd68a6 |
| institution | Kabale University |
| issn | 2227-7072 |
| language | English |
| publishDate | 2024-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj-art-632daef1f8c84bf2adaa03680bbd68a62024-12-27T14:29:58ZengMDPI AGInternational Journal of Financial Studies2227-70722024-10-0112410810.3390/ijfs12040108Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR ModelJunxiao Gui0Nathee Naktnasukanjn1Xi Yu2Siva Shankar Ramasamy3International College of Digital Innovation, Chiang Mai University, Chiangmai 50100, ThailandInternational College of Digital Innovation, Chiang Mai University, Chiangmai 50100, ThailandOverseas Education College, Chengdu University, Chengdu 610106, ChinaInternational College of Digital Innovation, Chiang Mai University, Chiangmai 50100, ThailandThis study employs the economic policy uncertainty index to gauge the level of economic policy uncertainty in China. Utilizing textual data from the growth enterprise market internet community, we construct the growth enterprise market investor sentiment index by applying the deep learning ERNIE (Enhanced Representation through Knowledge Integration) model, thereby capturing investors’ sentiment within the growth enterprise market. The dynamic interplay between economic policy uncertainty, investor sentiment, and returns of the growth enterprise market is scrutinized via the TVP-SV-VAR (time-varying parameter stochastic volatility vector auto-regression) model, and the asymmetric response of different industries’ stock returns within the growth enterprise market to economic policy uncertainty and investor sentiment shock. The findings of this research are that economic policy uncertainty exerts a negative influence on both investor sentiment and returns of the growth enterprise market. While it may trigger a temporary decline in stock prices, the empirical evidence suggests that the impact is of short duration. The influence of investor sentiment on the growth enterprise market returns is characterized by a reversal effect, suggesting that improved sentiment may initially boost stock prices but could lead to a subsequent decline over the long term. The relationship between economic policy uncertainty, investor sentiment, and returns of the growth enterprise market is time-variant, with heightened sensitivity observed during bull markets. Lastly, the effects of economic policy uncertainty and investor sentiment on the returns of different industries within the growth enterprise market are found to be asymmetric. These conclusions contribute to the existing body of literature on the Chinese capital market, offering a deeper understanding of the complex dynamics and the factors influencing market behavior.https://www.mdpi.com/2227-7072/12/4/108economic policy uncertaintyinvestor sentimentgrowth enterprises marketTVP-SV-VAR model |
| spellingShingle | Junxiao Gui Nathee Naktnasukanjn Xi Yu Siva Shankar Ramasamy Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model International Journal of Financial Studies economic policy uncertainty investor sentiment growth enterprises market TVP-SV-VAR model |
| title | Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model |
| title_full | Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model |
| title_fullStr | Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model |
| title_full_unstemmed | Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model |
| title_short | Research on the Impact of Economic Policy Uncertainty and Investor Sentiment on the Growth Enterprise Market Return in China—An Empirical Study Based on TVP-SV-VAR Model |
| title_sort | research on the impact of economic policy uncertainty and investor sentiment on the growth enterprise market return in china an empirical study based on tvp sv var model |
| topic | economic policy uncertainty investor sentiment growth enterprises market TVP-SV-VAR model |
| url | https://www.mdpi.com/2227-7072/12/4/108 |
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