Baidu index and predictability of Chinese stock returns

A number of studies have investigated the predictability of Chinese stock returns with economic variables. Given the newly emerged dataset from the Internet, this paper investigates whether the Baidu Index can be employed to predict Chinese stock returns. The empirical results show that 1) the Search Frequency of Baidu Index (SFBI) can predict next day's price changes; 2) the stock prices go up when individual investors pay less attention to the stocks and go down when individual investors pay more attention to the stocks; 3) the trading strategy constructed by shorting on the most SFBI and longing on the least SFBI outperforms the corresponding market index returns without consideration of the transaction costs. These results complement the existing literature on the predictability of Chinese stock returns and have potential implications for asset pricing and risk management

Economic complexity and the environment : Evidence from Brazil

Brazil is a heterogenous country with respect to, among others, economic complexity, economic development and environmental quality. This paper examines the relationship between economic complexity and key environmental variables in Brazil. We deviate from the Environmental Kuznets Curve (EKC) literature by focusing on economic complexity instead of economic development alone to explain cross-section and time-series variation in a range of environmental variables. Our motivation for considering economic complexity as a main explanatory variable lies on the consideration that low economic complexity is associated to products which are peripheral on the product space. These are products which are less connected to other products, limiting the opportunities for other economic activities, and therefore limiting the impact on the environment. As economic complexity increases more opportunities are created, the product space becomes denser, and pollution increases. However, at a high enough level of economic complexity, the structural changes bring knowledge-intensive industries, which demands higher-skilled labour force and wider skills of occupations. At this point, economic complexity is associated to decreasing environmental degradation. Using panel data for Brazil we find that waste generation decreases, but forest fires increase with rising complexity. Complexity is not associated to more deforestation or air pollution

Strategic Voting for Noncooperative Environmental Policies in Open Economies

Strategic voting, The race to the bottom, Market structure, Environmental policy, Representative democracy, F18, D72, D43,

Foreign aid, economic globalization, and pollution

This paper explores how trade and foreign direct investment (FDI) condition the effect of foreign aid on environmental protection in aid-recipient countries. We suggest that (1) environmental protection should be viewed as a public good and (2) all else equal, resource flows from abroad (via aid, trade, and FDI) influence governments’ incentives to provide public goods. (3) Because these resources shape governments’ incentives differently, their interactive effects should be examined. We begin with the assumption that developing country governments seek some optimal level of environmental protection, a level conditioned by their factor-intensive growth phase. We hypothesize that at low levels of export receipts or FDI inflows from the developed world, foreign aid is associated with superior environmental protection. This is because foreign aid, as an environmentally neutral addition to revenue, allows recipient governments to partially relax the trade-off between economic growth and environmental protection. As levels of export receipts or FDI inflows from the developed world increase, however, the salutary effect of foreign aid will diminish and eventually be reversed. This is because foreign aid mitigates the recipient government’s dependence on traders and investors in the developed world, and concomitantly reduces their pro-environmental policy leverage. Our analysis of 88 aid recipients, for the period 1980–2005, lends support to our argument