Economic Expectations and Stock Returns: Evidence from China Pakistan Economic Corridor

32 Pages Posted: 21 Feb 2020

See all articles by Suresh Kumar Oad Rajput

Suresh Kumar Oad Rajput

Sukkur IBA University

Muhammad Ilyas

Sukkur IBA University

Jahanzeb Khan

Sukkur IBA University - Business Administration Department

Date Written: January 24, 2020

Abstract

The ongoing hype of China Pakistan Economic Corridor (CPEC) as a game-changer for the economy of Pakistan has induced a lot of expectations among all the countrymen. In this paper, we have tried to investigate whether the CPEC driven economic expectations reflect in stock market returns. We, use weekly search volume data from millions of internet users across the country to reveal CPEC driven economic attitude. By combining the volume of Internet queries such as, “CPEC”, “CPEC Jobs”, “Tax”, “CPEC route”, “Transport” and so forth, we create an economic attitude (Expectations) revealed by search volume index, as a measure of investor sentiments. We find that Expectations predict stock returns in the short-run, and this effect is consistent across all the main business sectors. Moreover, we also find that the conditional variation in stock returns positively correlates with the conditional variation in Expectations. These results have important implications for active investors and fund managers.

Keywords: China Pakistan Economic Corridor (CPEC), Economic Expectations, Search Volume Index (SVI), Investor Sentiment, Stock Market Returns

JEL Classification: G10, G40

Suggested Citation

Oad Rajput, Suresh Kumar and Ilyas, Muhammad and Khan, Jahanzeb, Economic Expectations and Stock Returns: Evidence from China Pakistan Economic Corridor (January 24, 2020). Available at SSRN: https://ssrn.com/abstract=3525022 or http://dx.doi.org/10.2139/ssrn.3525022

Suresh Kumar Oad Rajput (Contact Author)

Sukkur IBA University ( email )

SUKKUR IBA UNIVERSITY
SUKKUR, SINDH 65200
Pakistan
00923363322855 (Phone)
65200 (Fax)

Muhammad Ilyas

Sukkur IBA University ( email )

http://www.iba-suk.edu.pk/
Sukkur, Sindh 65200
Pakistan

Jahanzeb Khan

Sukkur IBA University - Business Administration Department ( email )

Pakistan

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