News Decomposition using Log-Linear Structural VAR Approach - Evidence from Pan-Chinese Stock Markets -

Wu, Ming; Ohk, Ki Yool; Ko, Kwangsoo

doi:2019.48.1.29

Korean J Financ Stud > Volume 48(1); 2019 > Article

Korean Journal of Financial Studies 2019;48(1):29-50.
DOI: https://doi.org/10.26845/KJFS.2019.02.48.1.29 Published online February 28, 2019.

News Decomposition using Log-Linear Structural VAR Approach - Evidence from Pan-Chinese Stock Markets -

Ming Wu, Ki Yool Ohk, Kwangsoo Ko

구조형 벡터 자기회귀 모형을 이용한 뉴스 분해

오명, 옥기율, 고광수

부산대학교

Abstract

We decompose unexpected excess market returns into permanent cash-flow news, temporary cash-flow news, discount-rate news, and non-fundamental news using our log-linear SVAR model. We investigate the relative importance of news conditioned on market status in pan-Chinese stock markets (China, Hong Kong, and Taiwan). The major empirical findings are as follows. First, most excess market return variations are the result of discount-rate and non-fundamental innovations for China and Hong Kong, while, for Taiwan, they are explained by their own innovations. Second, contrary to the evidence of the U.S., discount-rate news is more important than cash-flow news in driving stock price movements in pan-Chinese stock markets. Third, non-fundamental (i.e., investor sentiments) also plays an important role in Hong Kong and Taiwan but not for China. Finally, news premiums are higher in a down market than in an up market. The contribution of this paper is two fold. First, we develop a new pricing test method for the log-linear model. Second, we examine whether investor sentiment can be a risk factor in pan-Chinese stock markets.

Key Words: 로그-선형 SVAR,현금흐름 뉴스,할인율 뉴스,투자자 심리,시장 상황,Log-Linear SVAR,Cash-Flow News,Discount-Rate News,Investor Sentiment,Market Status