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Macroeconomic Impact On The Financial Sector Stock Returns

Posted on:2011-12-01Degree:MasterType:Thesis
Country:ChinaCandidate:L SunFull Text:PDF
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The financial industry is a barometer of national economy, it is in a unique position which is directly related to a country's development and stability. As the special sector in the stock market, the financial sector has high sensitivity to domestic economy, macro-economy and other fundamental information. It is the first indicator of economy. So the volatility of the financial sector is a wind vane of a country's domestic economy development trend.With more than ten years development, what is effectiveness of China's stock market, how much macro-economy impact on financial sector, and why? This is the puzzle between China's macro-economy and financial sector. The purpose of this article is to resolve the puzzle. In this article, I will study the correlation puzzle between China's macro-economy and financial sector. First I will examine whether there is correlation between them; Second, if yes or no, I will study what is the reason for it on the basis of financial sector listed company's fundamentals.With the new statistics and on the basis of the previous studies, this paper analyzes from the point of theoretical and empirical view. The paper uses econometric method including:cointegration theory, granger causality tests, vector auto regression model and liner regression to research the empirical relationship between China's macro-economy and financial sector and then further analyses the reason of such relevance from the angle of fundamental mechanism of listed companies. The result indicates that China's stock market is a less efficient market but it is stepping into a strong form of efficiency. The future macro-economics will have greater impact on the stock market. However, from the micro dimension, there is efficiency to some extent. As a result of divergence in the process of transmission mechanism, the transmission chain performs a failure and finally macro-economic is irrelevant with the stock yield of financial plate. The paper provides an explanation to the "puzzle whether the Chinese macro-economic is correlated with the stock yield of financial plate.I will study the question according to this train of thought, and try to find a reasonable answer to it. I hope to provide theory foundation to authority, so that macro-economy can become an important factor in stock market returns and risk. Then there will be a virtuous circle between stock market and economic growth, which may form a mutually promotive mechanism between them.
Keywords/Search Tags:macro-economy, financial sector stock returns, the listed company's fundamentals, Vector Autoregressive Model (VAR), regression analysis
PDF Full Text Request
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