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The Chinese equity premium predictability: Evidence from a long historical data

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  • Ma, Feng
  • Cao, Jiawei

Abstract

Our paper reexamines the predictability of macroeconomic variables in China over a long period. Contrary to the findings in developed markets that macroeconomic variables have poor in- and out-of-sample forecasting performance in predicting equity premiums, we find that five of nine macroeconomic variables have senior in- and out-of-sample predictability at monthly and longer horizons. Moreover, the forecasting results can generate significant economic value for investors. Our study provides new evidence for Chinese stock prediction using macroeconomic variables.

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  • Ma, Feng & Cao, Jiawei, 2023. "The Chinese equity premium predictability: Evidence from a long historical data," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000429
    DOI: 10.1016/j.frl.2023.103668
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    References listed on IDEAS

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    3. Fang, Puyi & Gao, Zhaoxing & Tsay, Ruey S., 2023. "Supervised kernel principal component analysis for forecasting," Finance Research Letters, Elsevier, vol. 58(PA).
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    9. Gao, Bin & Zhang, Jinlong & Xie, Jun & Zhang, Wenjie, 2023. "The impact of carbon risk on the pricing efficiency of the capital market: Evidence from a natural experiment in china," Finance Research Letters, Elsevier, vol. 57(C).

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