Research Article
The Impact of Economic Policy Uncertainty, Investor Sentiment, and Monetary Policy on Stock Return Rates and Market Liquidity: A Systematic Analysis
@INPROCEEDINGS{10.4108/eai.12-1-2024.2347157, author={Shengqiang Yao and Xiaoming Li and Yao Huang and Luyi Huang and Xinyue Zhao}, title={The Impact of Economic Policy Uncertainty, Investor Sentiment, and Monetary Policy on Stock Return Rates and Market Liquidity: A Systematic Analysis}, proceedings={Proceedings of the 3rd International Conference on Big Data Economy and Digital Management, BDEDM 2024, January 12--14, 2024, Ningbo, China}, publisher={EAI}, proceedings_a={BDEDM}, year={2024}, month={6}, keywords={behavioral economics; investor sentiment; policy uncertainty; impulse response}, doi={10.4108/eai.12-1-2024.2347157} }- Shengqiang Yao
Xiaoming Li
Yao Huang
Luyi Huang
Xinyue Zhao
Year: 2024
The Impact of Economic Policy Uncertainty, Investor Sentiment, and Monetary Policy on Stock Return Rates and Market Liquidity: A Systematic Analysis
BDEDM
EAI
DOI: 10.4108/eai.12-1-2024.2347157
Abstract
This study examines the effects of policy uncertainty on stock return rates, analyzing the influences of monetary policies and investor sentiment on market dynamics. Expansionary policies are found to increase market liquidity, while contractionary policies decrease it. Policy uncertainty generally reduces stock return rates. Positive investor sentiment temporarily boosts return rates, but low sentiment can lead to market sell-offs, causing declines in stock prices and returns. Mediation regression analysis reveals that economic policy uncertainty (EPU) negatively correlates with stock returns, significantly lowering investor sentiment. This result indicates that investor sentiment acts as a mediator in the EPU-stock return relationship, highlighting its pivotal role in stock market dynamics under the lens of policy uncertainty.
