This study focuses on how China EPU may impact copper-firms stock returns and also how China EPU mediates between stock returns and copper prices returns.
The sample consists of 44 copper firms from January 2011 to March 2022. The study also considers a subsample of 29 net-exporters countries. Panel data methodology is used, allowing to control for unobservable heterogeneity and endogeneity problems. The equations are estimated through a dynamic panel using the generalized methods of moments (GMM).
China EPU has a negative and statistically significant relationship with stock returns. Copper price returns are positively associated with stock returns. This research also considers two scenarios: high and low levels of China EPU. For high levels of China EPU states it is reported a negative relationship between stock returns and China EPU and copper price returns show a positive relationship with stock returns.
There is need to explore other metals for what China exhibits a high demand and observe if China EPU and Global EPU have similar impacts on stock returns. It will be useful to identify main firm’s consumers of copper and these other metals to explore the relationship between EPU and stock returns.
To the best of the authors’ knowledge, this is the first paper that analyzes China EPU index and its impact on both copper-firms stocks returns and on changes in copper prices. This is done using all public copper firms worldwide.
Carlos Maquieira, Orlando Gahona-Flores & Christian Espinosa-Méndez (2023) How does China economic policy uncertainty (EPU) impact copper-firms stock returns and copper prices returns? Academia Revista Latinoamericana de Administración.1012-8255. DOI 10.1108/ARLA-11-2022-0203 https://www.emerald.com/insight/content/doi/10.1108/ARLA-11-2022-0203/full/html