Booms and busts in China's stock market: estimates based on fundamentals

Bondt, G.J. de; Peltonen, Tuomas A.; Santabárbara, Daniel

doi:10.1080/09603107.2010.530218

Cited by 15 publications

(5 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Secondly, we evaluate the implied country risk premium specific to the largest developed emerging economy, which has never been investigated in prior literature. Our findings are consistent with Bondt, Peltronen and Santabarbara (2010), which document that China's equity prices can be reasonably well modeled using conventional fundamentals, in particular corporate earnings.…”

Section: Introductionsupporting

confidence: 80%

The implied growth rates and country risk premium: evidence from Chinese stock markets

Wang

Huang

2014

Rev Quant Finan Acc

View full text Add to dashboard Cite

Realized stock market returns are volatile and poor reflections of economic growth and investor expectations in China. In this paper, we estimate simultaneously the implied long run growth rate and cost of equity capital for listed Chinese firms over the period [2004][2005][2006][2007][2008][2009][2010][2011][2012]. We find that the implied mean growth rate in earnings is around 10% and the mean implied cost of capital is about 14.6%. These suggest that the implied growth rates from companies' fundamentals are in line with the economic growth and the implied cost of capital is consistent with investors' expectations. Comparing with estimates for the US markets, we find that the mean country equity risk premium for this largest emerging market is about 6.5%. Our study has important implications to the Chinese policy makers and international investors. JEL Classification: G12 G15

show abstract

Section: Introductionsupporting

confidence: 80%

The implied growth rates and country risk premium: evidence from Chinese stock markets

Wang

Huang

2014

Rev Quant Finan Acc

View full text Add to dashboard Cite

show abstract

“…Empirical evidence indeed confi rms that the loose monetary conditions have caused equity and property prices to rise above sustainable levels in the past (de Bondt et al (2010), and Santabárbara (2011)). Such sharp asset and housing price movements may also affect the soundness of the banking system.…”

Section: Asset and Housing Price Boom-bust Cyclesmentioning

confidence: 91%

China's Economic Growth and Rebalancing

2013

Self Cite

View full text Add to dashboard Cite

“…1 Despite the rapidly expanding market capitalisation, the Chinese stock market is still immature and undeveloped due to the dominance of individual investors. With little investment knowledge and experience, individual investors trade like noise traders, who purely speculate and treat the market as a casino (De Bondt, Peltonen, & Santab arbara, 2011;Liu & Shrestha, 2008). In addition, the imperfect regulatory framework and social security system are attributed to the speculative behaviours of the stock market (Liu & Shrestha, 2008).…”

Section: Introductionmentioning

confidence: 99%

Dynamic relationship between the stock market and macroeconomy in China (1995–2018): new evidence from the continuous wavelet analysis

Wang

2020

Economic Research-Ekonomska Istraživanja

View full text Add to dashboard Cite

This article examines the relationship between the stock market and three widely used macroeconomic variables, namely industrial production growth, inflation, and long-term interest rate in China. We use the continuous wavelet analysis to investigate the correlations and lead-lag relationships between them in the time-frequency domain by covering a period of 1995M01-2018M04. Our findings show the positive relationship between stock returns and industrial production growth and between stock returns and inflation. Notably, we find that stock returns and long-term interest rate are negatively correlated in short and medium terms, while they are positively correlated in the long term. The puzzling positive correlation between stock returns and interest rate as well as the mixed lead-lag relationships suggest that the Chinese stock market is quite undeveloped. There are breakdowns of the link between the stock market and macroeconomy. Neither the stock return can be used as a leading indicator of the macroeconomy nor the real economy could predict the booms or busts of the Chinese stock market.

show abstract

Booms and busts in China's stock market: estimates based on fundamentals

Abstract: 4Non-technical summary 5

Cited by 15 publications

References 31 publications

The implied growth rates and country risk premium: evidence from Chinese stock markets

The implied growth rates and country risk premium: evidence from Chinese stock markets

China's Economic Growth and Rebalancing

Dynamic relationship between the stock market and macroeconomy in China (1995–2018): new evidence from the continuous wavelet analysis

Contact Info

Product

Resources

About