EconPapers    
Economics at your fingertips  
 

Analysis of the long-term relationship between macro-economic variables and the Chinese stock market using heteroscedastic cointegration

Ming-Hua Liu and Keshab M. Shrestha

Managerial Finance, 2008, vol. 34, issue 11, 744-755

Abstract: Purpose - The purpose of this paper is to investigate the relationship between the Chinese stock market indices and a set of macro-economic variables, i.e. money supply, industrial production, inflation, exchange rate and interest rates. Design/methodology/approach - The aims of this paper are addressed using heteroscedastic cointegration analysis. Findings - Results show that the cointegrating relationship does exist between stock prices and the macro-economic variables in the highly speculative Chinese stock market. Detailed analysis shows stock market performance is positively related to that of macro-economy in the long term. Research limitations/implications - The results imply that in the long run, investors can benefit in terms of better returns and portfolio diversification as the Chinese economy is expected to continue to perform strongly. Originality/value - The main contributions of this paper are two-fold: first, this is the first paper to examine the long-term relationship between the stock market indices and macro-economic variables in China, one of largest economies in the world. Second, heteroscedastic cointegration analysis is used and hence this paper controls for time-varying volatility.

Keywords: Stock markets; China; Macro-economics; Statistical analysis (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.emeraldinsight.com/10.1108/030743508109 ... RePEc&WT.mc_id=RePEc (text/html)
Access to full text is restricted to subscribers

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:eme:mfipps:v:34:y:2008:i:11:p:744-755

Ordering information: This journal article can be ordered from
Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
http://emeraldgroupp ... s/journals.htm?id=mf

Access Statistics for this article

Managerial Finance is currently edited by Professor Don T Johnson

More articles in Managerial Finance from Emerald Group Publishing
Bibliographic data for series maintained by Virginia Chapman ().

 
Page updated 2020-03-29
Handle: RePEc:eme:mfipps:v:34:y:2008:i:11:p:744-755