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Renminbi Revaluation, Euro Appreciation And Chinese Markets: What Can We Learn From Data?, Paul D. Mcnelis, Salih N. Neftçi
Renminbi Revaluation, Euro Appreciation And Chinese Markets: What Can We Learn From Data?, Paul D. Mcnelis, Salih N. Neftçi
CRIF Working Paper series
This paper examines financial market data to assess the likelihood of renminbi revaluation and its implications for Chinese share price increases, given the continuing appreciation of the Euro against the U.S. dollar. We find that the 3-month non-deliverable forward premia are key series linking these variables. The forward premia predict series A share-price changes, while Euro/US dollar exchange rates in turn predict foreward-premia. Bayesian models outperform standard linear models for forecasting performance.