EconPapers    
Economics at your fingertips  
 

Real estate climate index and aggregate stock returns: Evidence from China

Yuexiang Jiang, Tao Fu, Huaigang Long, Adam Zaremba and Wenyu Zhou

Pacific-Basin Finance Journal, 2022, vol. 75, issue C

Abstract: We show that China's real estate climate index (RECI) can be used to forecast the aggregate stock market return. It outperforms popular return predictors both in- and out-of-sample, especially at the monthly horizon. Additionally, RECI's predictive ability is stronger among stocks of small market capitalization and low momentum. For a typical mean-variance investor, RECI's predictive power may provide an additional utility gain of 3.41%. We discuss three potential sources of RECI's predictive ability and present the corresponding evidence, including the cash flow channel, the firm fundamental channel, and the investment substitution channel.

Keywords: Real estate climate index; Return predictability; Asset allocation; Predictive regression; Equity risk premium; Cash flow channel; Firm fundamentals; Substitution effect (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X22001366
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:pacfin:v:75:y:2022:i:c:s0927538x22001366

DOI: 10.1016/j.pacfin.2022.101841

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-11-11
Handle: RePEc:eee:pacfin:v:75:y:2022:i:c:s0927538x22001366