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A New Approach to Modeling Sector Stock Returns in China

Author

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  • Terence Tai-Leung Chong
  • Nasha Li
  • Lin Zou

Abstract

This article analyzes the relationship between excess stock returns and the macroeconomy of China. A factor-augmented regression is applied to a panel of 123 monthly Chinese macroeconomic time series. Eight fundamental macroeconomic factors are identified and used to examine the excess returns in industrial, commercial, real estate, and utilities sectors of the market. It is found that interest rate, output level, as well as property supply factors possess explanatory power for sector stock returns in China.

Suggested Citation

  • Terence Tai-Leung Chong & Nasha Li & Lin Zou, 2017. "A New Approach to Modeling Sector Stock Returns in China," Chinese Economy, Taylor & Francis Journals, vol. 50(5), pages 305-322, September.
    • Handle: RePEc:mes:chinec:v:50:y:2017:i:5:p:305-322
    DOI: 10.1080/10971475.2017.1345268
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    Cited by:

    1. Elizaveta V. Anufrieva, 2019. "Influence of Macroeconomic Factors on the Return of Russian Stock Exchange Indices," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 75-87, August.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G1 - Financial Economics - - General Financial Markets

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