Investigating the Impact of Trade Frictions on China's CSI 300 Index Under the HAR-RV-(C)J-Event Model

Abstract

The Sino-US trade friction has garnered significant attention from various sectors. Studying the impact of Sino-US trade friction on China's financial market volatility is of contemporary significance. this study uses the HAR-RV event extension model and the intraday jump Logistic model to quantitatively analyze the effects of Sino-US trade friction events on the CSI 300 Index and industry indices affected by increased tariffs (agricultural products, communication equipment, specialized equipment, medical devices, railway transportation, aerospace equipment). The study finds that Sino-US trade friction events can cause rapid but short-lived impacts on these indices; US sanctions announcements have a greater impact on the Chinese market than Chinese sanctions announcements; the communication equipment and medical device industries are most affected by US sanctions announcements; introducing trade friction events enhances the predictive power of the volatility prediction model both within and outside the sample. The empirical results of this study can serve as a reference for policymakers in preventing systemic financial risks.