The role of Chinese economic variables on Australian and New Zealand equity returns

Yongbo Ge, Ji Wu, Jing Zhang and Liping Zou

Accounting and Finance, 2019, vol. 59, issue 5, 3053-3103

Abstract: This study investigates the explanatory power of Chinese economic variables on Australian and New Zealand equity returns. Results suggest that Chinese economic variables have significant explanatory power for both market‐level and industry‐level portfolio returns. Our results are robust when using the principal component analysis (PCA) approach. We also find the predictive power is stronger for the post‐FTA period. In addition, the out‐of‐sample analysis confirms our previous results, suggesting that Chinese economic variables contain incremental information when estimating Australian and New Zealand equity market returns. We believe our findings have important implications for investors and policymakers in both countries.

Date: 2019
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https://doi.org/10.1111/acfi.12573

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