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Do the Chinese Bourses (Stock Markets) Predict Economic Growth?

Author

Listed:
  • Jeffrey E. Jarrett

    (Faculty of Management Science and Finance, University of Rhode Island, U.S.A.)

  • Xia Pan

    (Lingnan College, Sun Yat-sen University, Guangzhou, China)

  • Shaw Chen

    (Faculty of Management Science and Finance, University of Rhode Island, U.S.A.)

Abstract

We study the relationship between the Chinese macroeconomy and the Chinese stock markets, i.e., the bourses in Shanghai and Shenzhen. With this goal, we utilize multiple Granger causality and Geweke linear dependence and examine likelihood ratio statistics between two sectors of the Chinese economy: the Chinese economic prosperity score (EPS)¡Xand its departure from a "healthy level" (EPS-D)¡Xand composite indexes for Chinese securities markets¡XShanghai composite (SH) and Shenzhen composite (SZ). The data cover nine years. The authors found no evidence that SH and SZ Granger cause economic prosperity. The evidence supports the notions that Chinese stock markets respond greater to changes in EPS-D than to EPS and that the SZ is more sensitive to changes in the economy than the SH.

Suggested Citation

  • Jeffrey E. Jarrett & Xia Pan & Shaw Chen, 2009. "Do the Chinese Bourses (Stock Markets) Predict Economic Growth?," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 8(3), pages 201-211, December.
    • Handle: RePEc:ijb:journl:v:8:y:2009:i:3:p:201-211
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    References listed on IDEAS

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    Cited by:

    1. Kiryoung LEE & Chanik JO, 2018. "Forecasting Chinese Business Cycle Using Long-term Interest Rate Comovements," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 118-134, December.
    2. Lee, Kiryoung & Jeon, Yoontae, 2020. "Measuring Chinese consumers’ perceived uncertainty," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 51-70.

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    More about this item

    Keywords

    Granger causality; Geweke linear dependence; likelihood ratio tests; vector autoregression;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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