China’s Macroeconomic Fundamentals on Stock Market Volatility: Evidence from Shanghai and Hong Kong

Andy Wui Wing Cheng () and Iris Wing Han Yip ()
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Andy Wui Wing Cheng: Department of Economics and Finance, Hang Seng Management College, Hong Kong
Iris Wing Han Yip: Department of Mathematics and Statistics, Hang Seng Management College, Hong Kong

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2017, vol. 20, issue 02, 1-57

Abstract: This paper examines the effect of Chinese macroeconomic variables, the industrial production growth rate, the producer price index, the 3-month short-term Shanghai Interbank Offer Rate and the consumer price index, on the volatility of the Shanghai and Hong Kong stock markets. We apply the generalized autoregressive conditional heteroskedastic mixed data sampling model for the study. Our empirical findings on various indexes and enterprises in the Shanghai and Hong Kong markets show that Chinese macroeconomic variables have a greater power to explain the volatility in Hong Kong than in Shanghai. They also contribute significantly to Hong Kong’s market volatility.

Keywords: China; stock market volatility; GARCH-MIDAS; macroeconomic fundamentals (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1142/S021909151750014X

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