Exploring the Impact of the U.S. Macroeconomy on the Chinese Stock Market - Based on Market and Individual Stock Dimensions

Completed date: 2022-11-14.

This paper Employed the PLS method to analyze the volatility of the Chinese stock market, using 120 macroeconomic variables from the FRED-MD database in the United States. The results indicate a significant relationship with factors such as the global economic system, supply chain dynamics, and the China-US trade war. This paper also calculated the systemic risk posed by Chinese companies to the US macroeconomy, using macroeconomic indicators and individual stock returns, and applied PCA and Sparse-PCA for dimensionality reduction. Found that Sparse-PCA improves the economic interpretability of the 10 principal components more effectively than traditional PCA methods