Sector Volatility Spillover and Economic Policy Uncertainty: Evidence from China’s Stock Market

Following generalized variance decomposition, we identify the transmission structure of financial shock among ten sectors in China. Then, examine whether economic policy uncertainty (EPU) affects it through GARCH-MIDAS regression. We find that consumer discretionary, industrials, and materials are systemically important industries during sample period. Further research dynamic analysis shows each sector acts a time-varying role this structure. The results regression indicate none selected EPU indexes has significant long-term impact on total volatility spillover inter-sector stock market However, EPUs do affect some sectors’ long run, they significantly heterogeneous. This paper can provide regulatory suggestions for policymakers reasonable asset allocation risk avoidance methods investors.