CHINA FINANCIAL RESEARCH NETWORK
2011-08-30 第4卷 第4期
Gilbert V. Nartea
Lincoln University, New ZealandFaculty of Commerce
University of Nottingham, UKSchool of Contemporary Chinese Studies
University of California at BerkeleyEconomics Department
Gabe J. de Bondt
EUROPEAN CENTRAL BANKRESEARCH CENTRE
Gilbert V. Nartea Lincoln University, New ZealandFaculty of Commerce
We use Hong Kong stock market data for 1982-2001 to test the persistence of the size and value premia and the robustness of the Fama-French (FF) three-factor model in explaining the variation in stock returns. We document a statistically significant and persistent size effect or size premium that is robust even for non-January months but is heightened in January. We also find that the reversal of the size effect in January reported by Chui and Wei (1998) is unique to their study period, while the general reversal of the size effect reported by Lam (2002) may be due to a sample dominated by firms with low to medium book equity-to-market ratios. The book to market effect or value premium is weaker than the size effect and less consistent than in Fama and French (1993) and Drew and Veeraraghavan (2003). Our results also support the explanation that the size and value premia are rewards for risk bearing consistent with the efficient market hypothesis. We further find a large improvement in explanatory power provided by the French and Fama model relative to the CAPM but that the FF model is mis-specified for the Hong Kong market.
Shujie Yao University of Nottingham, UKSchool of Contemporary Chinese Studies
This paper investigates the dynamic and long-run relationships between monetary policy and asset prices in China using monthly data from June 2005 to September 2010. Johansen’s cointegration approach based on vector autoregression (VAR) and Granger causality test are used to identify the long-run relationships and directions of causality between asset prices and monetary variables. Empirical results show that monetary policies have little immediate effect on asset prices, suggesting that Chinese investors may be ‘irrational’ and ‘speculative’. Instead of running away from the market, investors rush to buy houses or shares whenever tightening monetary actions are taken. Such seemingly irrational and speculative behavior can be explained by various social and economic factors, including lack of investment channels, market imperfections, cultural traditions, urbanization and demographic changes. The results have two important policy implications. First, China’s central bank has not used and should not use interest rate alone to maintain macro-economic stability. Second, both monetary and non-monetary policies should be deployed when asset bubbles loom large to avoid devastating consequences when they burst.
Barry Eichengreen University of California at BerkeleyEconomics Department
This paper examines the impact of renminbi revaluation on foreign firm valuation and, by implication, firm prospects. To deal with the potential endogeneity of exchange rate movements, we consider not just official announcements of exchange rate policy but also 27 instances of market-perceived changes in China’s currency policy driven by domestic or foreign political pressure. Using information on 12,300 firms in 44 countries, we find that stock returns increased with renminbi revaluation expectations. This reaction was related as much to improved market sentiment as to specific trade channels, however. In terms of trade channels, we find that expectations of renminbi appreciation reduce the relative stock returns of firms providing components and raw materials to China as inputs for the country’s exports. There is also some evidence that expectations of renminbi appreciation reduce the stock prices of financiallyconstrained firms.
Gabe J. de Bondt EUROPEAN CENTRAL BANKRESEARCH CENTRE
This paper empirically models China’s stock prices using conventional fundamentals: corporate earnings, risk-free interest rate, and a proxy for equity risk premium. It uses the estimated long-run stock price misalignments to date booms and busts, and analyses equity market reforms and excess liquidity as potential drivers of these stock price misalignments. Our results show that China’s equity prices can be reasonable well modelled using fundamentals, but that various booms and busts can be identified. Policy actions, either taking the form of deposit rate changes, equity market reforms or excess liquidity, seem to have significantly contributed to these misalignments.
中国金融研究学术网（China Financial Research Network）发表金融研究工作论文和已发表论文的摘要。 如果您如希望按期收到最新的金融研究工作论文和已发表论文的摘要，请访问http://www.cfrn.com.cn,注册即可。 您如果想要发表您的工作论文或已发表论文的摘要，请访问http://www.cfrn.com.cn,注册，登录，然后上传。 中国金融研究学术网不拥有所发表的工作论文和已发表论文摘要的版权。读者可以免费浏览和下载。 如果您有任何问题，请联系我们。通过E-Mail发送至：email@example.com。或者通过邮寄方式，寄送至：清华大学经济管理学院中国金融研究中心。邮编：100084。
Copyright @ 2008 China Center for Financial Research,Tsinghua University. All Rights Reserved.