Chinese economic policy uncertainty and U.S. households' portfolio decisions

We find that U.S. households reduce their exposure to the stock market in response to an increase in the economic policy uncertainty (EPU) of not only U.S., but also to an increase in the Chinese EPU. We identify income uncertainty as a key driver of this relationship. In response to an increase in the Chinese EPU, households whose jobs belong to the industries that heavily exports to China react more sensitively by lowering their stock shares …