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The Stock Return Predictability and Stock Price Decomposition in the Chinese Equity Market

In: Experiences and Challenges in the Development of the Chinese Capital Market

Author

Listed:
  • Jun Ma

    (University of Alabama)

  • Zhenhua Su

    (Zhejiang University
    University of Chicago)

  • Mark E. Wohar

    (University of Nebraska)

Abstract

Since its advent in 1991, the Chinese equity market has developed greatly and has quickly become the 3rd largest stock market in the world, when combining both the Shanghai Stock Exchange and the Shenzhen Stock Exchange. There are several interesting features about the Chinese equity market given the nature of the transition economy of the Chinese nation (see e.g., Su, Ma, and Wohar (2014) for a detailed discussion). Because of its rapid growth, the Chinese equity market provides unique characteristics that are distinct from other well-developed equity markets. This lends itself to empirical tests of the validity of several asset pricing models. In this work, we focus our work primarily on the class A share market in the Chinese equity market in order to study the price fluctuations of those shares that are readily accessible by the domestic investors. We hope that such a study can shed light on some of the important topics in finance related to whether stock returns are predictable, and whether it is the cash flow component or the discount factor that dominates aggregate stock price fluctuations.

Suggested Citation

  • Jun Ma & Zhenhua Su & Mark E. Wohar, 2015. "The Stock Return Predictability and Stock Price Decomposition in the Chinese Equity Market," Palgrave Macmillan Books, in: Douglas Cumming & Alessandra Guariglia & Wenxuan Hou & Edward Lee (ed.), Experiences and Challenges in the Development of the Chinese Capital Market, chapter 8, pages 150-170, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-45463-8_8
    DOI: 10.1057/9781137454638_8
    as

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