Work detail

Chinese Stock Markets: Underperformance and its Determinants

Author: Bc. Roman Kováč
Year: 2015 - summer
Leaders:
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 88
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/155097/
Abstract: Performance of stock markets is determined by three classes of variables:
macroeconomic indicators, industry & firm heterogeneity and third country effects.
When assessing performance of a stock market index, impact of industry & firm
heterogeneity is marginal as it is already embedded in the index through its
constituent companies. This paper will therefore focus on the other two. Chinese
stock market was selected as an application as their performance compared to other
domestic indicators (mainly GDP growth) is considered inferior by many
researchers. Using econometric framework for panel data and a Bayesian
extension, the paper estimates multiple models of Chinese stock market
performance examining individual determinants of it. Subsequently, it predicts
development of theoretical prices of two main Chinese stock indices on two time
samples until 2013. The paper then demonstrates underperformance of Chinese
stock market by comparing the modeled prices to actual prices realized on the
market.

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