EconPapers    
Economics at your fingertips  
 

What global economic factors drive emerging Asian stock market returns? Evidence from a dynamic model averaging approach

Xiyong Dong and Seong-Min Yoon ()

Economic Modelling, 2019, vol. 77, issue C, 204-215

Abstract: Due to marketization and globalization, emerging Asian stock markets are influenced by numerous global factors, such as the business cycle, uncertainty in economic and monetary policy, financial and commodity markets, and investor sentiment. This study explores the global economic factors that significantly impact on emerging Asian stock market returns, and especially those that were important during the financial crisis, by applying a dynamic model averaging (DMA) approach. The advantage of this approach is that it takes account of the fact that forecasting models and their coefficients can change over time. However, unlike existing DMA studies that consider only forecasted asset prices, we analyse both the in-sample relationship and out-of-sample predictability of the impact of global factors on stock returns, according to the sensitivity of stock markets. In terms of in-sample relationship, we find that developed stock and exchange rate markets show a strong relationship with emerging Asian stock markets due to financial market integration. In contrast, the forecasting power of economic fundamentals is highest out-of-sample because stock markets reflect real economic activity.

Keywords: Emerging Asian stock market; Dynamic model averaging; In-sample; Out-of-sample; Global economic factor; Transmission mechanism (search for similar items in EconPapers)
JEL-codes: C58 F36 F65 G14 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999318306357
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:77:y:2019:i:c:p:204-215

DOI: 10.1016/j.econmod.2018.09.003

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2021-01-15
Handle: RePEc:eee:ecmode:v:77:y:2019:i:c:p:204-215