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| Measuring China's Financial Uncertainty: A Method Based on a Large Dataset |
| HUANG Zhuo, QIU Han, SHEN Yan, TONG Chen
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| National School of Development and Institute of Digital Finance, Peking University |
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Abstract Based on the method of big data analysis proposed by Jurado et al. (2015), this paper uses the 280 monthly economic and financial variables to construct the 2002-2017 monthly China's financial uncertainty index. We make an empirical analysis of China's financial uncertainty index from two aspects: stock market volatility and systemic risk of financial institutions. The empirical results show that the financial uncertainty index can well predict the realized volatility in the stock market after controlling the lagged volatility; we also find that an increase in financial uncertainty will significantly increase the systemic risk of financial institutions, especially the larger financial institutions. Out results suggest that the financial uncertainty is an important source of volatility in financial markets.
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Received: 01 September 2018
Published: 21 December 2018
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