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Chinese Stock Returns and the Role of News-Based Uncertainty

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  • Zhi Su
  • Man Lu
  • Libo Yin

Abstract

Academic research relies extensively on fundamentals to forecast stock returns, with relatively little attention paid to the news channel. To fill this gap, we use the NVIX as a proxy for news-based uncertainty, to investigate its predictive power for Chinese stock returns wavelet analysis and prediction framework. We find that the long-term NVIX statistically and economically predicts Chinese stock returns in an in-sample and out-of-sample analysis, while the short-term NVIX almost has no predictability. In addition, we confirm the links between the long-term NVIX and the US and Chinese real economy, which might be why the long-term NVIX has good predictability for Chinese stock returns.

Suggested Citation

  • Zhi Su & Man Lu & Libo Yin, 2019. "Chinese Stock Returns and the Role of News-Based Uncertainty," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(13), pages 2949-2969, October.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:13:p:2949-2969
    DOI: 10.1080/1540496X.2018.1562898
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    Cited by:

    1. Xiaohong Shen & Gaoshan Wang & Yue Wang & Alfred Peris, 2021. "The Influence of Research Reports on Stock Returns: The Mediating Effect of Machine-Learning-Based Investor Sentiment," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-14, December.
    2. Guan, Jialin & Xu, Huijuan & Huo, Da & Hua, Yechun & Wang, Yunfeng, 2021. "Economic policy uncertainty and corporate innovation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    3. Wang, Gaoshan & Yu, Guangjin & Shen, Xiaohong, 2021. "The effect of online environmental news on green industry stocks: The mediating role of investor sentiment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).

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