Economically-Linked Economies and Forecasting Chinese Stock Returns

21 Pages Posted: 7 Nov 2012

See all articles by Steven J. Jordan

Steven J. Jordan

Econometric Solutions

Mark E. Wohar

University of Nebraska at Omaha

Andrew Vivian

Loughborough University

Date Written: June 13, 2012


We explore whether economic links via trade affect aggregate Chinese stock market returns. We find that market return indices from countries that China net exports from can forecast the Chinese aggregate market return at the weekly time horizon. Countries that China net exports to have no consistently significant OOS predictability.

The economic intuition for our results follows from the fact that China has positioned itself as a low-cost provider competing on price. As a low-cost provider China has a more difficult time passing cost increases through to export customers because of sticky prices. However, production must meet demand implying that costs will drive short term economic gains for the overall Chinese economy. One interpretation of our results is that supply shocks are absorbed within 2 weeks.

Keywords: China, forecast, import, export, macroeconomics, forecast combinations

JEL Classification: C53, E37, F37, G15, G17

Suggested Citation

Jordan, Steven J. and Wohar, Mark E. and Vivian, Andrew, Economically-Linked Economies and Forecasting Chinese Stock Returns (June 13, 2012). Available at SSRN: or

Steven J. Jordan (Contact Author)

Econometric Solutions ( email )

3520 Fossil Park Dr.
Fort Worth, TX NA 76137
United States

Mark E. Wohar

University of Nebraska at Omaha ( email )

Department of Economics
6708 Pine Street MH 332S
Omaha, NE 68182
United States
402-554-3712 (Phone)
402-554-2853 (Fax)


Andrew Vivian

Loughborough University ( email )

The Business School
Ashby Road
Loughborough LE11 3TU
Great Britain

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