Asymmetric Reactions of China’s Stock Market to Short-Term Interest Rates

Fang, Fang; Dong, Weijia; Lv, Xin

doi:10.5539/ijef.v8n5p260

Cited by 4 publications

(3 citation statements)

References 26 publications

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“…The study uses a log of daily stock returns from the Shanghai Stock Exchange Composite Index and three-month interest rates over the period from 2013 to 2015. The study shows that interest rates help in forecasting stock returns in China, which also confirm the findings of Fang et al, (2016) that interest rates have a significant effect on stock returns.…”

Section: Interest Ratessupporting

confidence: 85%

Macroeconomic Determinants of Stock Market Returns in the Gulf Cooperation Council

Alshihab

2021

IJEFI

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This study investigates the impact of certain macroeconomic determinants on stock market returns in the Gulf Cooperation Council (GCC). Those macroeconomic factors are: interest rates, oil prices, exchange rates, and money supply. Those factors were empirically studied and investigated to have an impact on stock market returns in many countries. This paper also attempts to capture that impact of those macroeconomic factors on the stock market, using a panel set of data by implying several tests on the data, which include unit root tests, cointegration test, and error correction model (ECM). The empirical results support previous studies that suggest the high reliance of governments and stock markets in the GCC on macroeconomic determinants, specifically oil prices, while other determinants were found to have less effect on stock market returns than oil prices. The findings of the study will presumably enable investors and stakeholders in making better investment decisions, in addition to assisting policy-makers in enhancing the efficiency of stock markets and better regulating them.

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Section: Interest Ratessupporting

confidence: 85%

Macroeconomic Determinants of Stock Market Returns in the Gulf Cooperation Council

Alshihab

2021

IJEFI

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“…Some studies found a negative relationship between interest rates and equity markets. The studies include Haider (2018), Laichena and Obwogi (2015), Okech and Mugambi (2016), Okechukwu et al (2019), Fang et al (2016), Shula (2017), Bature et al (2019), Pilinkus and Boguslauskas (2015), Khalid (2017), Ibrahim and Musah (2014), Teitey (2019), Florackis et al (2014), Marfatia (2014), Hashim et al (2018); Najaf and Najaf (2017); Osei (2016); Khan and Khan (2018), Shrestha and Subedi (2014), Msindo (2015), Dima (2015), Mutheu (2016), Mahzabeen (2016), Ali (2014), Gu et al (2021), Setiawan (2020), andMapolisa (2019).…”

Section: Empirical Studiesmentioning

confidence: 99%

The Impact of Interest Rates on the South African Equity Market

Mapfumo,

Adelowotan,

Mcgill

2023

EJEF

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This paper investigates the effects of interest rate fluctuations on the South Africa's equity market. The Johannesburg Stock Exchange (JSE) - All Share Index (ALSI) was used as a proxy for the equity market, whilst treasury bill rates were used to represent interest rates. The Vector Auto Regression (VAR) model was applied to analyze the relationship between interest rates and the equity market. The Vector Error Correction Model (VECM) augmented the analysis by assessing the short and long-run dynamic relationship between the two variables. Monthly data was collected from Thomson Reuters and the South African Reserve Bank from 2002 to 2020. The results indicate that the relationship between interest rates and the equity market was significant but negative; that is, equity or share prices fall when the interest rates rise. A fall in share prices resembles poor or negative performance of the equity market; therefore, the market capitalization and share face value of listed companies is negatively affected. The outcomes of this study may assist the central bank in understanding the relationship between interest rates and equity prices, which can assist in the implementation of monetary policy tools that control interest rates volatility and reduce negative impact on the equity market. Policymakers and authorities could use the knowledge attained from this study to understand the relationship between interest rates and the equity market because an unnecessary increase in interest rates may negatively affect the equity market, leading to slow economic growth.

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“…These findings are similar to those in Fang et al . (2016), who investigate how China’s stock market reacts to changes in the Shanghai Interbank Offered Rate (Shibor). They find that market reaction depends on the state of the economy and conclude that China’s market appears quite distinct from the US market or the markets of other developed countries.…”

Section: Main Analysismentioning

confidence: 99%

Market Reactions to Central Bank Interest Rate Changes: Evidence from the Chinese Stock Market*

Jiang

Pan

2020

Asia-Pac J of Fin Stud

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Contrary to theoretical expectations and empirical evidence in developed markets, the Chinese stock market reacts positively (negatively) to interest rate increases (cuts) by the central bank. During the period from January 1996 to December 2016, the Shanghai Composite Index had an average abnormal return of 1.07% (−1.85%) in reaction to interest rate increases (cuts) over the two‐day announcement window. We further demonstrate that short‐term market reactions are transitory and have no permanent effect. Finally, we reveal that short‐term market reactions cannot be explained by market frictions or information uncertainty. Rather, such reactions are likely driven by investor sentiment.

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Asymmetric Reactions of China’s Stock Market to Short-Term Interest Rates

Cited by 4 publications

References 26 publications

Macroeconomic Determinants of Stock Market Returns in the Gulf Cooperation Council

Macroeconomic Determinants of Stock Market Returns in the Gulf Cooperation Council

The Impact of Interest Rates on the South African Equity Market

Market Reactions to Central Bank Interest Rate Changes: Evidence from the Chinese Stock Market*

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