Sentiment Effects on Chinese Share Prices and Savings Deposits: The 2003-2007 Experience
Richard C. K. Burdekin
Claremont McKenna College - Robert Day School
July 1, 2008
Robert Day School of Economics and Finance Research Paper No. 2008-6
This paper examines the importance of sentiment effects on asset allocation decisions in mainland China and beyond. Rising stock market sentiment is found to negatively and significantly impact Chinese savings deposit growth over the 2003-2007 period. Investor sentiment also exerted consistently significant effects on the discounts attached to Chinese B-shares, H-shares and ADRs by foreign investors. Although the sample period is limited by availability of the sentiment data, the indicated effects remain most robust when controlling for relative stock market performance, liquidity levels, expected exchange rate movements, and such 'indirect' sentiment measures as market and firm-specific price-earnings ratios.
Number of Pages in PDF File: 40
Keywords: China, savings deposits, share prices, sentiment, Shanghai, Hong Kong, ADRs
JEL Classification: O16, G15working papers series
Date posted: October 11, 2008
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