This paper investigates the mechanism of transmitting economic policy uncertainty (EPU) shocks to capital structure. We adopt a novel approach that bridges the asset pricing implications of EPU and the debt-financing decisions of Chinese firms by introducing a variable “policy-risk-induced...

We study the impact of economic policy uncertainty (EPU) shocks on the long-run stock market variances and correlations, primarily for the US and the UK. We find that US EPU shocks affect both US and UK stock market long-run variances and correlation, but UK EPU shocks only affect its own...