Publication Type

Journal Article

Publication Date

4-2013

Abstract

In the last few decades, we observed a significant increase in global economic activities and these activities may have an impact on both China’s economy and stock market. Given the potential impact, we empirically examine whether US economic variables are leading indicators of the Chinese stock market. Prior to China joining the World Trade Organization (WTO) in the end of 2001, we find no statistical relationship between US economic variables and the Chinese stock market returns. However, we find US economic variables have statistically significant predictive power for periods after China's admission into the WTO. In addition, we show that the combination of US and China economic variables is more superior in terms of forecasting ability than either single country economic variables. These findings are of economic importance from an investment perspective.

Keywords

Chinese stock market, Return predictability, International investment

Discipline

Finance and Financial Management

Research Areas

Finance

Publication

Pacific-Basin Finance Journal

Volume

22

First Page

69

Last Page

87

ISSN

0927-538X

Identifier

10.1016/j.pacfin.2012.10.002

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://dx.doi.org/10.1016/j.pacfin.2012.10.002

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