Proactive
Structural Strategic China
Shanghai-Shenzhen 300 index ETF pricing and Arbitrage Pricing Trading Volume
Relationship Simulation
Monetary,
Economic, Fiscal Policy Impact on US/China Housing, Prices, Mortgage Crisis and
China Stock Index Futures
Chinese
Spline
GARCH- Granger Causes, Casualty Analysis of China Macroeconomic, housing market
control, RMB speculation impact on ShSZ 300 Futures and component portfolio Prices, Risks Early Warning
Warren
Huang, OSA Global Strategic Management , San Francisco, CA, US, http://www.osawh.com/, osawhh@sina.com
wh3928@yahoo.com
Fenglan
Zhang,
Abstract
This paper extended Dr. .Warren
Huang’s 30 years pioneering proactive structural interest rate,
currency stocks, bond, housing , commodities asset prices valuation and bubbles
bursts Operations Simulation Analysis (OSA) to R. Engles Spline-GARCH and
Granger’s Causes and Casualty analysis co-integration of dynamic macro,
industrial finance time series estimation.
This research
applying OSA thousands artificial intelligence, neural net
based causes and consequences simulators , which have been developed,
implemented last 20 years proactive strategic investment, markets, credit risks
early warning for 30 million China, US Taiwan 15 cities 30 million
institutional, private investors, QFII, QDII, real estate, multinational
oil CEO, seniors executives and 24 global central bank governors, risks
management conferences.
These proactive structural simulators integrate
macro, financial, industrial economic OSA tracking, forecast years, months
ahead of the emerging bull/bear markets trends of daily equities, bond,
commodities, metal, energy housing, Shanghai-Shenzhen 300 index portfolio asset prices mechanism and causes, onset, spread, recovery, early warning of last 20
years global banking, financial and asset bubble burst, loan default, credit crisis and
its impact on real time daily global stock indices prices.
provide strategic indexing ETF
arbitrage, day trading , take advantage of the mispricing ( under and overpricing of stocks )
maximize risks adjusted return.
These models replacing current 30 year old probabilistic, statistical CAPM asset
pricing, financial ratio valuations approach, provide proactive,
structural deterministic simulation of last 20 years China/global monetary,
economic policy, macro economic, housing, stocks, commodities price bubbles
resulted wealth gain excess liquidity, impact on daily interest
rate, currency, stock indices
This work implemented Engles, Spline GARCH,
Granger causes, and casualty co-integration, tracking China Peoples Bank
monetary, economic policy, macro-economic, housing industry price bubbles
control removing RMB currency, stocks, housing wealth gain excessive hot money
liquidity speculation trading volume and , inflation rate, and US Dow Jones Index (
global investors sentiments, US mortgage crisis) impact on China stock price
bubble, especially Shanghai-Shenzhen 300 index futures price. It confirm OSA
analysis among the dependent,-independent variables causes and casualty
analysis, indicating low causes due to money
supply growth (central banks ignoring Dr. Warren Huang warning on asset prices
bubble, policy emphasize on GDP and CPI ), and industrial
production contribution little to stock prices, indicating stock bubbles
did not contribute to production) and highly correlated, caused wit
correlation higher than 0.94) by RMB, housing prices wealth gain excess
liquidity and Dow Jones stock index, (with Hong Kong, QFII investor sentiment and
housing mortgage crisis correlation constant greater than 0.98 and average error
below 1.8 % in covering daily data from Jan 2005- Dec. 28, 2007. to current.
Further
application of EGARCH to macroeconomic inflation, currency, oil prices,
mortgage loan default have been achieved jointly by Dr. Huang and this
author.
He warned on
June 2007 Peking University Int'l Financial Engineering Risk Management
Conference and Sept. 2007 on Wall Street Market Beat, Real Time Economics, Blog
that US housing price continue slump into summer 2008 drag US into recession,
Dow Jones, stock markets and global stocks into bear market
correction China macro-economic, housing control raise interest rates 6
time, Banking deposit rate 16 times to 17.5 %, remove excessive housing, stock
market wealth gain led to inflation up 8.7 % and China
Peoples Bank credit tightening continue to cool off the
coastal housing price continue
into 2008, drag China stocks into bear market correction,
with banking, housing, oil petrochemical stocks down 50- 70 %, SHSZ 300 index
follow Dow Jones plunged below 11000, SHSZ index plunged from 6000 to
1500- 2100 in 2009
start
rebound second half 2009 as infrastructure program into full steam.
Keyword :
Housing Bubbles, Equities bubbles,
Engles, Spline GARCH, Granger causes, casualty, Operations
Simulations Analysis, proactive
structural CAPM ,global
stock indices, credit risk, market risks, currency interest rates derivatives pricing ,
risks
hedging.
presented
to Peking University International Financial Engineering Risks Management Conference,
June 10, 2007, Beijing, China with Nobel 2003 Economic prize winner
R. ENgle as keynote speaker
Nan
Taiwan University. International Finance Conference, De. 16, 2007,Taipei
Dr. Warren Huang
(黃華南博士)
Pioneer, proactive
structural dynamic global inflation, macro economy, daily financial markets
interest rates, currency, stock, bond, derivatives, housing,
commodities, oil asset pricing and risks valuation markets
fundamentals price mechanism, accurately warned
on Wall Street Journal Market beat Blog Sept.19, 2007
and Mar
5, 2008 masterclass workshop China fund world 2008, Pudong,
China to Goldman Sach managing directors JPM, UBS and 150
China QDII/QFII fund managers
that US Fed aggressive rate
cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost
consumer spending on gasoline and jet fuel summer, demand, driving gasoline ,
heating oil to 415, oil price to 121-145, commodity price
double, will peak out as US
dollar rebound follow Fed ending rate cuts cycle , can not
stop
sub-prime crisis spreading, regional housing price slump 30-50
% and credit crisis, crunch crisis continue through 2009 drag economy into
2009 repeating 1980 double dip
inflationary recession resulted trillion housing and stock market
loss and US, global stock indices and oil, commodities ,
metals price bubble burst bear market 50-70 % , Dow Jones
test 6000- 7000 NASDAQ PLUNGE
testing 1100-1250- and high fliers (GOOG,
PTR, AAPL) , IT, retail stocks facing 50-- 70 % correction,
with banking, finance, housing share price plunge 70- 90 %, dollar making to new
low 85- 90 Yen, commodity prices doubled, and bubble burst plunge
50-70 % % in recession widening bond
, CDS spread and failure in MBS/CDO,
Bear Stearn 30 billion dollar MBS hedge fund
and government steps rescue, Lehaman bankruptcy, Fannie Mae, Freddie Mac
AIG,bail out, despite
Fed rate cuts
. , oil price plunge from 147 to 40, copper plunged from 350 to 115,
corn from 600 to 350, He also warned top global QFII management on Peking Univ June 2007 International Financial Engineering Conference
that China overheated
housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity,
Banking housing, stock markets follow US
housing price slump, recession, bear market correction, and China 568 billion
infrastructure rogam maintain 2009 GDP at 8 % and stbilize stock markets,
Shanghai traded 1500- 2100 through 2008- 09 early 2009 until
economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing
prices still up 0.5 % , FIXED investment , consumer
spending still up 22 %, first 9 month GDP still up 9.9 %, CPI drop to 2.4% in
Oct.2008 % after
China peoples Bank 6 rate hikes, 16 bank deposit rat hike to 17.5 %. China
need to further cut its M2 money supply growth from 15 % to 12 %start rate
cuts to support 2009 growth while next year
to achieve housing price cut of 30 %, CPI to 3 %, GDP to 8 % to achieve soft
landing and start of bull market stock rally