Asset price macroeconomic variables and monetary shockWord文件下载.docx
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——CointegrationanalysisofChineseMarket
YingDeng邓瑛
DepartmentofEconomics,UniversityofMunich,Germany
XinhuaSchoolofFinanceandInsurance,ZhongnanUniversityofEconomicsandLaw,China
Abstract:
Inthispaper,IinvestigatewhetherthecurrenteconomicactivitiesarecointegratedwiththestockpriceinChinaonthebasisoftheresponseofstockpricestomacroeconomicfluctuations.Isetupahypothesisandtheoreticalmodelusingthevectorerrorcorrectionmodel.Thiscointegrationrelationindicatesdirectlong-runandequilibriumrelationsbetweenassetpriceandfourmacroeconomicvariablesinChina,i.e.industrialproduction,consumptionexpenditure,monetarysupply(M1)andconsumerpriceindex.TogetherwiththeresultofGrangercausalitytest,italsodemonstratesthatstockpriceindexandconsumptionindexaswellasthemonetarysupplyadjusttothepreviousequilibriumerror.IalsogiveanexplanationfromthepointofinstitutionaldeficienciesinChineseeconomicandfinancialsystem,andpresentsomepolicyimplicationsfromthecointegrationanalysis,includingdeepeningthereformoffinancialsystemandmakingalowlong-runinflationobjectiveinclusiveassetpriceasanewnominalanchor.
Keywords:
assetprice,macroeconomicvariables,cointegration,monetarypolicy
1.Introduction
Therelationshipbetweenstockpricesandmacroeconomicvariableshasbeenpredominantlyinvestigatedassumingthatononehand,macroeconomicfluctuationsareinfluentialonstockpricesthroughtheireffectonfuturecashflowsandtherateatwhichtheyarediscounted(Chenetal.1986;
GeskeandRoll1983;
Fama1981),andontheotherhandstockpricesareinfluentialonmacroeconomythroughconductionchannelsofmonetarypolicy,suchaswealtheffect,Qeffect,liquidityeffectetc..
Anumberofmacroeconomicfactorshavebeenusedtorepresentriskinmaturestockmarkets.EarlierstudiesweremainlymotivatedbytheArbitragePricingTheory(Ross1976),andcouldbeperceivedasglobalassetpricingmodels(FersonandHarvey1998).Someofthepopularfactorsusedinthesemodelswereindustrialproduction,inflation,interestrates,andoilprices(Hamao1998;
HarrisandOpler1990).Thelogicandmethodologiesused,therefore,arebasedontheunderstandingthatexpectedreturnsaredependentupontheseriskfactors.Thedirectionoftherelationshipisthusassumedtobeunidirectional,andfrommacroeconomicvariablestostockreturns.
Dynamiclinkagesbetweenstockmarketsandmacroeconomicvariablesareequallyimportant,whichturntobeabi-directionalrelationship,orcointegrationalrelationship,wherestockpricealsoplaysanimportantroleintransmittingmacroeconomicpolicy,suchasmonetarypolicytotherealeconomyandinfluencesthemacroeconomicvariables.Fluctuationsofthestockmarket,whichareinfluencedbymonetarypolicy,haveimportantimpactsontheaggregateeconomy.Transmissionmechanismsinvolvingthestockmarketareoffourtypes:
1)Tobin’sQeffectsoninvestment,2)firmbalance-sheeteffects,3)householdwealtheffectsonconsumptionand4)householdliquidityeffects.
However,suchlinkageshavebeeninvestigatedonlyrecentlyandextensivelyfordevelopedmarkets(MukherjeeandNaka1995;
Lee1992).Dynamiclinkagesintheemergingmarketsoflessdevelopedcountries,suchasChinahavebeenignored,withafewexceptions.Suchrelationshipisconsiderable,however,mainlyduetotheoverwhelminginfluenceofgovernmentsineconomicactivity.Stockmarketshavebeenestablishedonlyrecently,thevolumeoftradeislow,andcompany-specificinformationisnotalwaystimelyorofhighquality.Therefore,stockmarketsareinclinedtoinfluencefromeconomicpolicy.
ThefoucusofthispaperisoninvestigatingthecointegrationrelationshipbetweenthestockpriceandsomemacroeconmicvariablesinChina,withacomparisontoaU.S.A.Inordertoestablishthecausalordering,GrangercausalitytestsandVECMmodelareemployedwhere,foralong-termdynamicequilibriumbetweenassetpriceandmacroeconomicvariables,acorrectedcointegrationequationwillbesetup.Andasadiscussionfortheresultofcointegrationanalysis,IwillfinallypresentsomeimportantreasonsfromthepointofinstitutionaldeficienciesofChineseeconomicandfinancialsystemandgivesomepolicyimplications.
2.LiteratureReview
Dynamicgeneral-equilibriummodelprovidesasimpleframeworkwithinwhichonecanexaminetheimpactoffundamentalsonabroadrangeofeconomicvariables,includingthemarketvalueoffirms,investment,output,andthecapitalstock.Theframeworkadoptedherediffersfrommostmacroeconomicanalysesbyadoptingpreferencesthatarenotseparableacrossstatesofnature;
thisspecification(non-expectedutility),followingEpsteinandZin(1989)andWeil(1990),allowsaseparationbetweenriskaversionandintertemporalsubstitutionandhencecanbettermatchasset-pricingregularities.Thespecificationandsolutionofthemodelwiththesepreferencesmaybeunfamiliartosomeandofindependentinterest.
Therefore,thekeyinsightsprovidedbythemodelrelatetothegeneral-equilibriumdeterminationofconsumption,investment,anddividends.
2.1Consumption-basedAssetPricing
ConsumerPreferences
Therepresentativeconsumer’spreferences(U)aredefinedrecursivelybyMichaelKiley(2004)asfollows:
(2.1)
whereχ>
0,0<
β<
1,andE{}isthemathematicalexpectationsoperator,Crepresentsconsumption,andtheremainingsymbolsrepresentparametersoftheutilityfunction.Thisrecursivedefinitionofpreferencesallowsforaseparationoftheintertemporalelasticityofsubstitution(whichequals1inequation(2.1))andthecoefficientofrelativeriskaversion(χ)asinEpsteinandZin(1989)andWeil(1990).Whenχequals1,therecursioninequation(2.1)collapsestothestandardexpectedutilitycase,inwhichthecoefficientofrelativeriskaversionequalstheinverseoftheintertemporalelasticityofsubstitution(i.e.,1);
whenχdiffersfrom1,therecursionimpliesthatpreferencesarenotseparableacrossstatesandthecoefficientofrelativeriskaversiondiffersfromtheinverseoftheintertemporalelasticityofsubstitution.Notably,χgreaterthan1impliesthatconsumersaremoreriskaversethanunderexpectedutility.
Ontheinfluenceonconsumptionbystockprice,thestudyonwealtheffecthasbeentakenonatleastfor30years.TestsoftheconsumptionCAPMusinghousehold-leveldatahaveshownthattheconsumptionofstockholdersismorehighlycorrelatedwithexcessreturnsonthestockmarketthantheconsumptionofnon-stockholders,whichsuggestsatleastsomeroleforthedirectchannel.MankiwandZeldes(1991)discoverthisrelationship,usingannualobservationsonfoodconsumptionfromthePSID.Attanasio,Banks,andTanner(1998)confirmedtheresultforabroadermeasureofconsumption,observedataquarterlyfrequency,fromtheUKFamilyExpenditureSurvey,andVissing-Jø
rgensen(1999)andBrav,Constantinides,andGeczy(1999)
producedsimilarfindingsusingtheCE.
Moreover,AndreasGunnarssonandTobiasLindqvist(2000)madeanempiricalstudyontheinfluenceofstockpriceandhousingpriceonprivateconsumptionaswellasinflation,findingthatstockpriceispositiverelativewithprivateconsumptionwithalagof3to6months,andthepaststockpriceplaysamoreimportantrolethanthecurrentprice.Lettau,Martin,Ludvigson,SydneyandCharlesSteindel(2001)foundanobviouswealtheffectinUSA,butwereuncertainaboutthevalueofwealtheffect.CharlesGoodhartandBorisHofmann(2001)regardedthat,valueofwealtheffectdependsonthepercentageoffinancialassetinthetotalwealthholdbyprivatesector.Thehistoricdatashowsthatequityassethasgainedanincreasingpercentageinrecentyears.
2.2Production-basedAssetPricing
Aproductiontechnologydefinesan“investmentreturn,”the(stochastic)rateofreturn
thatresultsfrominvestingalittlemoretodayandtheninvestingalittlelesstomorrow.
Withaconstantreturntoscaleproductionfunction,theinvestmentreturnshouldequalthestockreturn,datapointfordatapoint.Themajorresultisthatinvestmentreturns—functionsonlyofinvestmentdata—arehighlycorrelatedwithstockreturns,whichisanempiricalresultfordevelopedcountries.
Thepredictionisessentiallyafirst-differencedversionoftheQtheoryofinvestment.
ThestockreturnisprettymuchthechangeinstockpriceorQ,andtheinvestmentreturnisprettymuchthechangeininvestment/capitalratio.Thus,thefindingisessentiallyafirst-differencedversionoftheQtheorypredictionthatinvestmentshouldbehighwhenstockpricesarehigh.Thisviewboreupwelleventhroughthegyrationsofthelate1990s.
OnecentralargumentofJamesTobin’sseminal1969JournalofMoney,CreditandBankingpaperwasthat“financialpolicies”canplayacrucialroleinalteringwhatlaterbecameknownasTobin’sq,themarketvalueofafirm’sassetsrelativetotheirreplacementcosts.Tobinemphasizedthat,inparticular,monetarypolicycanchangethisratio.This1969JMCBpapertogetherwithanotherofhiscontributions(Tobin1978)becameakeyelementintheformulationandunderstandingofthestockmarketchannelofmonetarypolicytransmission.
Wheninternetstockpriceswerehigh,investmentininternettechnologyboomed.PastorandVeronesi(2004)showhowthesamesortofideacanaccountfortheboomininternetIPOsasinternetstockpricesrose.Theformationofnewfirmsrespondstomarketpricesmuchasdoesinvestmentbyoldfirms.
TheQtheoryalso
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