Economically-Linked Economies and Forecasting Chinese Stock Returns
21 Pages Posted: 7 Nov 2012
Date Written: June 13, 2012
Abstract
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Cross-Market Trading in China’s Large State-Owned Commercial Banks
By Richard C. K. Burdekin and Yang Yang
-
Enter the Dragon: Interactions between Chinese, U.S. and Asia-Pacific Equity Markets, 1995-2010
By Hong Kong Institute For Monetary And Financial Research Submitter
-
Enter the Dragon: Interactions between Chinese, US and Asia‐Pacific Equity Markets, 1995‐2010