MF 34,11
744
Analysis of the long-term kin between macroeconomic variables and the Chinese stock commercialise employ heteroscedastic cointegration
Ming-Hua Liu
Faculty of Business, Department of finance, Auckland University of Technology, Auckland, New Zealand, and
Keshab M. Shrestha
Nanyang Business School, Nanyang Technological University, Singapore
Abstract
employment The purpose of this stem is to investigate the birth 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/ improvement The aims of this paper are addressed using heteroscedastic cointegration analysis. Findings Results show that the cointegrating birth does exist between stock prices and the macro-economic variables in the highly defective Chinese stock market. Detailed analysis shows stock market performance is positively related to that of macro- economic system in the long term.
investigate 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 Paper type Research paper
Managerial Finance Vol. 34 No. 11, 2008 pp. 744-755 # Emerald Group Publishing Limited 0307-4358 inside 10.1108/03074350810900479
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