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China’s Macroeconomic Fundamentals on Stock Market Volatility: Evidence from Shanghai and Hong Kong

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  • Andy Wui Wing Cheng

    (Department of Economics and Finance, Hang Seng Management College, Hong Kong)

  • Iris Wing Han Yip

    (Department of Mathematics and Statistics, Hang Seng Management College, Hong Kong)

Abstract

This paper examines the effect of Chinese macroeconomic variables, the industrial production growth rate, the producer price index, the 3-month short-term Shanghai Interbank Offer Rate and the consumer price index, on the volatility of the Shanghai and Hong Kong stock markets. We apply the generalized autoregressive conditional heteroskedastic mixed data sampling model for the study. Our empirical findings on various indexes and enterprises in the Shanghai and Hong Kong markets show that Chinese macroeconomic variables have a greater power to explain the volatility in Hong Kong than in Shanghai. They also contribute significantly to Hong Kong’s market volatility.

Suggested Citation

  • Andy Wui Wing Cheng & Iris Wing Han Yip, 2017. "China’s Macroeconomic Fundamentals on Stock Market Volatility: Evidence from Shanghai and Hong Kong," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(02), pages 1-57, June.
    • Handle: RePEc:wsi:rpbfmp:v:20:y:2017:i:02:n:s021909151750014x
    DOI: 10.1142/S021909151750014X
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