The Chinese equity premium predictability: Evidence from a long historical data

Our paper reexamines the predictability of macroeconomic variables in China over a long period. Contrary to the findings in developed markets that macroeconomic variables have poor in-and out-of-sample forecasting performance in predicting equity premiums, we find that five of nine macroeconomic variables have senior in-and out-of-sample predictability at monthly and longer horizons. Moreover, the forecasting results can generate significant economic value for investors. Our study provides new evidence for Chinese stock prediction using macroeconomic variables.