[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/snb/snbwpa/2018-09.html
   My bibliography  Save this paper

Did China's anti-corruption campaign affect the risk premium on stocks of global luxury goods firms?

Author

Listed:
  • Dr. Thomas Nitschka
Abstract
Media reports suggest that the recent Chinese anti-corruption campaign adversely influenced business prospects of globally operating luxury goods firms. This paper empirically tests this hypothesis. This paper finds that risk-adjusted returns on stock portfolios consisting of luxury goods firms with high exposure to China shifted persistently downward around the launch of the anti-corruption campaign. Risk-adjusted returns tend to co-vary with the intensity of the campaign. The evidence suggests that the Chinese anti-corruption campaign constituted negative cash-flow news about the affected global luxury goods firms. These findings neither pertain to luxury goods firms with low exposure to China nor to firms from other industries.

Suggested Citation

  • Dr. Thomas Nitschka, 2018. "Did China's anti-corruption campaign affect the risk premium on stocks of global luxury goods firms?," Working Papers 2018-09, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2018-09
    as

    Download full text from publisher

    File URL: https://www.snb.ch/en/publications/research/working-papers/2018/working_paper_2018_09
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jennifer N. Carpenter & Fangzhou Lu & Robert F. Whitelaw, 2015. "The Real Value of China's Stock Market," NBER Working Papers 20957, National Bureau of Economic Research, Inc.
    2. Campbell, John Y, 1991. "A Variance Decomposition for Stock Returns," Economic Journal, Royal Economic Society, vol. 101(405), pages 157-179, March.
    3. Graham Elliott & Ulrich K. Muller, 2006. "Efficient Tests for General Persistent Time Variation in Regression Coefficients," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 907-940.
    4. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    5. Patton, Andrew J. & Timmermann, Allan, 2010. "Monotonicity in asset returns: New tests with applications to the term structure, the CAPM, and portfolio sorts," Journal of Financial Economics, Elsevier, vol. 98(3), pages 605-625, December.
    6. Liu, Laura Xiaolei & Shu, Haibing & Wei, K.C. John, 2017. "The impacts of political uncertainty on asset prices: Evidence from the Bo scandal in China," Journal of Financial Economics, Elsevier, vol. 125(2), pages 286-310.
    7. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    8. John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," The Review of Financial Studies, Society for Financial Studies, vol. 1(3), pages 195-228.
    9. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    10. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    11. Fama, Eugene F. & French, Kenneth R., 2017. "International tests of a five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 123(3), pages 441-463.
    12. Yan, Wu & Powell, John G. & Shi, Jing & Xu, Wei, 2007. "Chinese stock market cyclical regimes: 1991-2006," Economics Letters, Elsevier, vol. 97(3), pages 235-239, December.
    13. Fama, Eugene F. & French, Kenneth R., 2015. "A five-factor asset pricing model," Journal of Financial Economics, Elsevier, vol. 116(1), pages 1-22.
    14. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Nitschka, 2022. "China’s anti-corruption campaign and stock returns of luxury goods firms," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(2), pages 159-177, June.
    2. Yu Wang & Haicheng Shu, 2019. "Evaluating the Performance of Factor Pricing Models for Different Stock Market Trends: Evidence from China," Working Papers 2019-10-10, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    3. Gala, Vito D. & Pagliardi, Giovanni & Zenios, Stavros A., 2023. "Global political risk and international stock returns," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 78-102.
    4. Guo, Laite, 2023. "Two faces of the size effect," Journal of Banking & Finance, Elsevier, vol. 146(C).
    5. , & Stein, Tobias, 2021. "Equity premium predictability over the business cycle," CEPR Discussion Papers 16357, C.E.P.R. Discussion Papers.
    6. Daniel J. Tulloch & Ivan Diaz-Rainey & I. M. Premachandra, 2020. "Modelling Sector-Level Asset Prices," JRFM, MDPI, vol. 13(6), pages 1-32, June.
    7. Shi, Huai-Long & Zhou, Wei-Xing, 2022. "Factor volatility spillover and its implications on factor premia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    8. Vicente Esteve & Manuel Navarro-Ibáñez & María A. Prats, 2013. "The present value model of US stock prices revisited: long-run evidence with structural breaks, 1871-2010," Working Papers 04/13, Instituto Universitario de Análisis Económico y Social.
    9. Cakici, Nusret & Zaremba, Adam, 2022. "Salience theory and the cross-section of stock returns: International and further evidence," Journal of Financial Economics, Elsevier, vol. 146(2), pages 689-725.
    10. Ciciretti, Rocco & Dalò, Ambrogio & Dam, Lammertjan, 2023. "The contributions of betas versus characteristics to the ESG premium," Journal of Empirical Finance, Elsevier, vol. 71(C), pages 104-124.
    11. Berggrun, Luis & Cardona, Emilio & Lizarzaburu, Edmundo, 2020. "Firm profitability and expected stock returns: Evidence from Latin America," Research in International Business and Finance, Elsevier, vol. 51(C).
    12. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2017. "Research in finance: A review of influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 43(C), pages 188-199.
    13. José Luis Miralles-Quirós & María Mar Miralles-Quirós & José Manuel Nogueira, 2020. "Sustainable Development Goals and Investment Strategies: The Profitability of Using Five-Factor Fama-French Alphas," Sustainability, MDPI, vol. 12(5), pages 1-16, February.
    14. Demetrescu, Matei & Georgiev, Iliyan & Rodrigues, Paulo M.M. & Taylor, A.M. Robert, 2022. "Testing for episodic predictability in stock returns," Journal of Econometrics, Elsevier, vol. 227(1), pages 85-113.
    15. Vicente Esteve & Manuel Navarro-Ibáñez & María A. Prats, 2013. "The present value model of U.S. stock prices revisited: long-run evidence with structural breaks, 1871-2010," Working Papers 1305, Department of Applied Economics II, Universidad de Valencia.
    16. Shi, Qi, 2023. "The RP-PCA factors and stock return predictability: An aligned approach," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    17. Atanasov, Victoria & Nitschka, Thomas, 2017. "Firm size, economic risks, and the cross-section of international stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 110-126.
    18. Giorgio Canarella & Rangan Gupta & Stephen M. Miller & Stephen K. Pollard, 2019. "Unemployment rate hysteresis and the great recession: exploring the metropolitan evidence," Empirical Economics, Springer, vol. 56(1), pages 61-79, January.
    19. Reboredo, Juan C. & Ugolini, Andrea, 2022. "Climate transition risk, profitability and stock prices," International Review of Financial Analysis, Elsevier, vol. 83(C).
    20. Hanauer, Matthias X. & Lauterbach, Jochim G., 2019. "The cross-section of emerging market stock returns," Emerging Markets Review, Elsevier, vol. 38(C), pages 265-286.

    More about this item

    Keywords

    Asset pricing; financial markets; political risk;
    All these keywords.

    JEL classification:

    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:snb:snbwpa:2018-09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Enzo Rossi (email available below). General contact details of provider: https://edirc.repec.org/data/snbgvch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.