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

Gabe de Bondt, Tuomas A. Peltonen and Daniel Santabárbara

No 1190, Working Paper Series from European Central Bank

Abstract: This 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

Keywords: China; Equity market; liquidity; reforms; Stock price (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-tra
Note: 337418
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Booms and busts in China's stock market: estimates based on fundamentals (2011)
Working Paper: Booms and busts in China's stock market: Estimates based on fundamentals (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101190

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