Economic policy uncertainty and stock price informativeness

Abstract

Will economic policy uncertainty enhance stock price informativeness? Due to information and expected concerns, investors will consider policy uncertainty as risk. We examine the effect of policy uncertainty on firms' stock price informativeness and find a positive association. For expected economic policy uncertainty, the effect is weak and insignificant. Unexpected economic policy uncertainty is mainly affecting the stock price informativeness and institution investor behaviors are the reason for stock price informativeness increase. This association mainly exists in firms with private ownership, centralized equity, and smaller financial risk listed companies. We conclude that the policy uncertainty increases the stock price informativeness. The conclusions have theoretical and practical significance for finance market governance and corporate strategy.