The Relationship Between Hong Kong Stock Market And Chinese Macroeconomic Variables:The APT Model

As the stock market activities is an important part in the global economy. Recent period, Chinese economy is growth rapidly and became a second largest market in the world; I choose to use the APT model on Hong-Kong stock market. I focused on the two types of portfolio which is H-share stocks and Red-Chip stocks. I put the samples from main-board of HKEX, separated to two types of stocks with several macro-economic variables into the Arbitrage Pricing Theory which is analyzed by Principal Component Analysis and Regression Analysis.I am compared H-share stocks to Red-Chip stocks by regression analysis and found some effective macro variables. H-share is intimate relation with Chinese national industry market condition and forecast of industry activity, whereas Red-Chip is intimate relation with historical fact variables, especially, product variables.And then I compared Chinese macro-variables which variables are pull the string of Chinese economics by principal component analysis. I found three principal components in H-share with macro-economic variables. First principal component is intimate relation with forecast survey index, second principal component is intimate relation with currency exchange and third principal component is relation with USD and historical product price variables. Whereas Red-Chip first principal component is intimate relate with market and stock variables, second principal component is intimate relate with micro and historical effective variables and third principal component is also relate with micro and historical effective variables.