Do Macroeconomics Matter to Chinese Stock Returns?

We investigate whether macroeconomics factors price Chinese stock returns. We find that GDP growth and momentum factor demand negative pricing premiums after controlling for market, value and size factors. The negative pricing of GDP growth is robust after controlling for momentum factor, the negative effects of stocks' size and volatility and the cheap pricing of their fundamentals. The negative pricing of momentum factor is robust after competing with stocks' characteristics, GDP growth and RMB appreciation. We also find that a stock's size, value, earnings yield, cash-flow yield, return reversal and idiosyncratic volatility predict stock returns after controlling for these factors