Re-Study on Dynamic Connectedness between Macroeconomic Indicators and the Stock Market in China

Ngo Thai Hung ()
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Ngo Thai Hung: University of Finance-Marketing, Ho Chi Minh City, Vietnam.

Journal for Economic Forecasting, 2022, issue 2, 104-124

Abstract: This study investigates the dynamic links between the stock market and macroeconomic fundamentals in China by using monthly data ranging from 2002:M2 to 2019:M12. Based on wavelet analysis, the results reveal that interrelatedness between stock and macroeconomic returns is statistically significant at low, medium, and high frequencies in this country. We find that stock returns have a positive influence on the macroeconomic variables in the long run, indicating that the stock market leads macroeconomic factors. However, macroeconomic variables impact the stock market on short term. In addition, we build the wavelet-based Granger causality test at various time scales to provide additional support to our causal association outcomes. The empirical findings of this study offer straightforward insights into investors and policymakers in connection with relationships between the stock market and macroeconomic variables in China.

Keywords: China; macroeconomic variables; stock market; Wavelet analysis; co-movement (search for similar items in EconPapers)
JEL-codes: E44 F31 G15 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2022:i:2:p:104-124

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