Chinese Stock Returns and the Role of News-Based Uncertainty. Issue 13 (21st October 2019)

• Record Type: Journal Article
• Authors: Su, Zhi; Lu, Man; Yin, Libo
• Is Part Of: Emerging markets finance & trade. Volume 55:Issue 13(2019)
• Page Start: 2949
• Page End: 2969
• Publication Date: 2019-10-21
• Subjects: Chinese stock returns -- news-based uncertainty -- NVIX -- prediction -- wavelet analysis; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2018.1562898
• Languages: English
• ISSNs: 1540-496X

Abstract

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.