The driving factors and transmission mechanism of equity premium: Evidence from China’s stock market

被引：0
|
作者：
Min F. [1 ]
Wu B. [2 ]
Wen F. [2 ]
机构：
[1] School of Finance, Zhejiang University of Finance & Economics, Hangzhou
[2] School of Business, Central South University, Changsha
来源：
Xitong Gongcheng Lilun yu Shijian/System Engineering Theory and Practice | 2023年 / 43卷 / 04期
基金：
中国国家自然科学基金;
关键词：
economic fundamentals; equity premium; investor sentiment; monetary policy; transmission mechanism;
D O I：
10.12011/STEP2021-2399
中图分类号：
学科分类号：
摘要：
Understanding the main driving factors and transmission mechanism of equity premium is of great importance to improve the forecasting performance of equity premium. This paper studies the dynamic effect of the main driving factors of equity premium on equity premium by using data on China’s stock market. Our findings are as follows: 1) output gap, CPI and investor sentiment shocks have a significant impact on equity premium, while interest rate shocks have a limited impact; 2) State dependent effects of driving factor shocks on equity premium are found. The impact of output gap shocks is greater in the periods of economic recession, while CPI, sentiment and monetary policy shocks have a greater impact in the periods of economic expansion; 3) The explanatory power of these factors to the equity premium mainly comes from the explanatory power to the expected return, and relatively small from the explanatory power to cash flow and discount rate news; 4) Market sentiment shock has the greatest explanatory power to explain the fluctuation of equity premium. Therefore, fully exploring the information about the change of investor sentiment is more likely to improve short-term forecasting performance of equity premium. Our research reveals the dynamic effects and transmission mechanism of economic fundamentals, market sentiment and monetary policy shocks on equity premium, which can provide valuable guidance for the construction of prediction model and investment decision-making. © 2023 Systems Engineering Society of China. All rights reserved.
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页码：1044 / 1067
页数：23
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