| In recent years, capital market is playing a more and more important role in our country’s long-term stable development. The scholars all over the world are focused on the relation between Macro-economics and capital returns. For a long time, many scholars studied the relation between Macro-economics and capital returns based on CAPM. At the beginning, lots of empirical results show that CAPM is usable in the stocks markets in most countries. However, something abnormal appears in financial market, that the empirical results can not explain the realities from the 60s. People became suspicious of the validity of CAPM.In order to find the factors that impact the returns of stocks market, scholars make a lot of theoretical researches and empirical analysis. However, most of the studies in our country are focus on the relation between the movement of the stocks market and the macro-economics, or the relation between the stocks market returns and the macro-economic variables. The study of the relation between economic growth and future excess returns of risky assets is very few. And most regressions use all the monthly or quarterly data to study the lessons.In this paper, we study the relation between economic growth and the future excess return of risky assets. To verify whether there will be different results for different risky assets, we make regression between economic growth and future excess return of stocks, and economic growth and future excess return of bonds respectively, according to Fama and French(1989). Through that way, we can get the relation between economic growth and future excess returns of the generalized risky assets. We compare the predicting power of quarterly data and yearly data. Then, we analysis the results come with monthly data, to find further reasons. At last, we use consumer confidence as an empirical proxy for risk aversion to make further study, and we explain the usability of quarterly data.In this paper, we first study the predictive power of economic growth to the excess returns of equity. Then, we verify the results using excess return of bonds.(1)The predictive power of economic growth to the return of equity assets.According to the regression, we find that the third quarter economic growth have a strong power to predict the excess return of equity assets, and they have a significant negative correlation, while other quarters of economic growth do not have this character.To verify that it is real economics not other factors that lead the result, we do the following two works.First, we want to know whether it is matter with the time the future excess returns of equity we choose. We make regression with future excess returns of equity during different period of time. The results show that it is still the third quarter economic growth that have a strong power to predict the excess return of equity assets, and they have a significant negative correlation, while other quarters of economic growth do not have this character.Then, we want to verify whether it is matter with inflation. For this reason, we make a regression between inflation and excess returns of equity, and find that they do not have a significant relation.According to the results we concluded above, we think that the predictive power of macro-economic growth to the excess return of equity is derived from the information contained in the third quarter.(2) Using the excess return of bonds to verify the conclusion we make above.According to the results of the regression we do with bonds which is the same as we do with equity, we make the same conclusion that the third quarter economic growth have a strong power to predict the excess return of bonds, and they have a significant negative correlation, while other quarters of economic growth do not have this character.Our conclusion is that negative (positive) movements in economic growth during the third quarter strongly predict high (low) future excess returns. The findings in the paper suggest a special role of the third quarter of a year economic growth for the time series properties of asset prices and suggest that investors should take consideration of the third quarter growth rate of macroeconomic when adjust their portfolio and consumption decisions. At last, we show the deficiency of this paper. |
