Proceedings of the 3rd International Conference on Big Data Economy and Digital Management, BDEDM 2024, January 12–14, 2024, Ningbo, China

Research Article

The Impact of Economic Policy Uncertainty, Investor Sentiment, and Monetary Policy on Stock Return Rates and Market Liquidity: A Systematic Analysis

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  • @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
Shengqiang Yao1, Xiaoming Li1, Yao Huang1,*, Luyi Huang1, Xinyue Zhao1
  • 1: Zhejiang Yuexiu University
*Contact email: 20142011@zyufl.edu.cn

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.