Time-frequency relationship between heterogeneous uncertainties and stock market extreme risk: new evidence from China

We empirically investigate the dynamic correlation between different uncertainties and stock market extreme risk across multiple time-frequency domains, providing novel evidence for the multiscale heterogeneity of popular uncertainty measures. Our findings reveal a more significant short-term relationship between the observable news-based economic uncertainty proposed by Baker et al. (2016) and China's stock market extreme risk, while the latent economic uncertainty suggested by Jurado et al. (2015) dominates the long-term time horizon. Moreover, financial uncertainty is also a crucial source of stock market extreme risk that cannot be ignored.