Abstract
We find that technical indicators have substantial predictive power over the Chinese equity risk premium. Technical indicators complement macroeconomic variables in predicting the Chinese equity risk premium. The predictive power is more pronounced at a weekly frequency rather than a monthly frequency as suggested by the out-of-sample tests. Furthermore, weekly-level technical indicators can predict the firm-level excess returns while monthly-level indicators cannot. The weekly-level indicators can also predict sorted portfolio excess return and risk factors. Overall, in comparison with the US stock market, the Chinese stock market seems to have higher-frequency price trends. The cross-sectional predictive power of the technical indicators is closely related to market capitalization rather than volatility.
| Original language | English |
|---|---|
| Journal | International Review of Finance |
| DOIs | |
| Publication status | Published - 31 Jan 2021 |
| Externally published | Yes |
Keywords
- equity risk premium predictability
- macroeconomic variables
- momentum
- moving averages
- out-of-sample forecasts
- short-term trend
- technical analysis
- the Chinese stock market