Explaining Disparities in AH Stock Premium Returns with Chinese Economic Policy Uncertainty: Evidence Based on a Non-Parametric Analysis | Zendy

Mohib Ur Rahman | Zendy; Bing Xu | Zendy; Yuan Xiao | Zendy; Wentsung Lai | Zendy

Open Access

Explaining Disparities in AH Stock Premium Returns with Chinese Economic Policy Uncertainty: Evidence Based on a Non-Parametric Analysis

Author(s) -

Mohib Ur Rahman,

Bing Xu,

Yuan Xiao,

Wentsung Lai

Publication year - 2019

Publication title -

journal of advanced computational intelligence and intelligent informatics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.172

H-Index - 20

eISSN - 1343-0130

pISSN - 1883-8014

DOI - 10.20965/jaciii.2019.p0658

Subject(s) - econometrics , china , proxy (statistics) , stock (firearms) , index (typography) , parametric statistics , economics , kernel density estimation , computer science , statistics , mathematics , political science , mechanical engineering , machine learning , estimator , world wide web , law , engineering

This paper empirically investigates the AH share premium puzzle considering the impact of economic policy uncertainty (EPU) in China, using Hang Seng AH premium (HSAHP) index data from March 2011 to June 2018. Specifically, the index of Baker, Bloom, and Davis is used as a proxy for EPU in China. The data has been divided into two periods: 0 and 1. Period 0 includes data before the launch of the stock connect program and spans from March 2011 to October 2014, while period 1 represents data from after the launch of stock connect program and spans from November 2014 to June 2018. To more robustly test the change in AH premiums after the “connect” is launched; we evaluate the impact of Chinese EPU using non-parametric kernel density estimation. The empirical results show that parameter uncertainty explains variations in price disparity and can significantly reduce the returns of the AH share premium index.

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