Abstract:

Based on the time-varying parameter-vector auto regression (TVP-VAR) model, a time-varying correlation between economic policy uncertainty, investor's sentiment and stock price synchronicity has been examined. The results show that the economic policy uncertainty has the positive effect on stock price synchronicity with obvious volatility in the short and medium term, and the long-term effect is relatively weak and has the stable performance. The investor's sentiment has a negative impact on the stock price synchronicity, and the short-term impact is the most obvious and the long-term impact is weak. The results of the time-point impulse function show that the stock price synchronicity has the positive response to the impact of the economic policy uncertainty and the negative response to the impact of the investor's sentiment at different time points. And there are differences in terms of response degree and response time at different time points. The conclusion sheds new light on how to further improve the policy control system, regulate and guide investors' behavior, and promote market rationalization.

Key words: economic policy uncertainty, investor's sentiment, stock price synchronicity, time-varying parameter-vector auto regression (TVP-VAR)