Booms and busts in China's stock market: Estimates based on fundamentals
AbstractThis paper empirically models China’s stock prices using conventional fundamentals: corporate earnings, risk-free interest rate, and a proxy for equity risk premium. It uses the estimated longrun stock price misalignments to date booms and busts, and analyses equity market reforms and excess liquidity as potential drivers of these stock price misalignments. Our results show that China’s equity prices can be reasonable well modelled using fundamentals, but that various booms and busts can be identified. Policy actions, either taking the form of deposit rate changes, equity market reforms or excess liquidity, seem to have significantly contributed to these misalignments. JEL Classification: G12, G18
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Date of creation: May 2010
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Other versions of this item:
- Gabe de Bondt & Tuomas Peltonen & Daniel Santabarbara, 2011. "Booms and busts in China's stock market: estimates based on fundamentals," Applied Financial Economics, Taylor & Francis Journals, vol. 21(5), pages 287-300.
- Gabe J. de Bondt & Tuomas A. Peltonen & Daniel Santabárbara, 2010. "Booms and busts in China's stock market: Estimates based on fundamentals," Banco de Espaï¿½a Working Papers 1032, Banco de Espa�a.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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