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    The Chinese stock market and economic activity.

    11683_Yao, Juan 1998.pdf (3.099Mb)
    Access Status
    Open access
    Authors
    Yao, Juan
    Date
    1998
    Supervisor
    Dr Lakshman Alles
    Dr Michael Thorpe
    Type
    Thesis
    Award
    MCom
    
    Metadata
    Show full item record
    School
    School of Economics and Finance
    URI
    http://hdl.handle.net/20.500.11937/861
    Collection
    • Curtin Theses
    Abstract

    The primary purpose of this research is to perform an empirical test using Arbitrage Pricing Theory (APT) in order to investigate the relationship between the Chinese stock market performance and domestic economic activity.China's stock market was established in early 1990s and has operated through a period of strong economic growth. Generally, it has been recognized that the development of a sound financial market is necessary to sustain and support a high growth economy. In turn, a growing economy will drive financial market growth. This research is designed to shed light on this unique relationship by investigating the links between China's booming national economy and the domestic stock returns.Using both time-series and cross-section regressions, several identified macro economic variables are shown to be significant in their influence on stock returns. These variables include the growth rate of industrial production, the growth rate of total social retail sales, the growth rate of terms of trade and the growth rate of total social saving deposits. Stock market indexes are found significantly related to the stock portfolio returns in time-series regressions.Overall, the empirical results suggest that the rapid growth of the Chinese economy is factored into stock returns by the market. It also indicates that the market index has strong explanatory power over, the time-series returns, providing empirical support for the market model Capital Asset Pricing Model (CAPM). However, the explanations of cross-section returns need to be further explored.

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