The Role of Chinese Economic Variables on the Australian and New Zealand Equity Returns

48 Pages Posted: 23 Oct 2019

See all articles by Yongbo Ge

Yongbo Ge

affiliation not provided to SSRN

Ji (George) Wu

Massey University - School of Economics and Finance

Jing Zhang

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE)

Liping Zou

School of Economics and Finance, Massey Univeristy, Albany

Date Written: October 14, 2019

Abstract

This study investigates the explanatory power of Chinese economic variables on the Australian and New Zealand equity returns. Results suggest that Chinese economic variables have significant explanatory power for both market-level and industry-level portfolio returns. Our results are robust when using the Principal Component Analysis (PCA) approach. We also find the predictive power is stronger for the post-FTA period. In addition, the out-of-sample analysis confirms our previous results, suggesting that Chinese economic variables contain incremental information when estimating Australian and New Zealand equity market returns. We believe our findings have important implications for investors and policymakers in both countries.

Keywords: return predictive ability, economic variables, out-of-sample forecast, principal component analysis

JEL Classification: C53, F3, G12, G17

Suggested Citation

Ge, Yongbo and Wu, Ji (George) and Zhang, Jing and Zou, Liping, The Role of Chinese Economic Variables on the Australian and New Zealand Equity Returns (October 14, 2019). Available at SSRN: https://ssrn.com/abstract=3469918 or http://dx.doi.org/10.2139/ssrn.3469918

Yongbo Ge

affiliation not provided to SSRN

Ji (George) Wu

Massey University - School of Economics and Finance ( email )

Private Bag 102904
North Shore
Auckland, Auckland 0745
New Zealand
+6292127089 (Phone)

Jing Zhang (Contact Author)

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 10246
China

Liping Zou

School of Economics and Finance, Massey Univeristy, Albany ( email )

Auckland, 0745
New Zealand

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