The Study On The Relationship Between Stock Price And Inflation In China

Stock market develops day by day in our country, the stock investment already became one of many people's important investment channels, but stock returns ratio is directly decided by the change of stock price. The stock price is afected by many different factors, inflation rate, as an important macroscopic variable, in what way it affect the stock market and what kind of relationship the two variables have, is it posotive, negative or have no certain relationship just like some classical theory have stated? This is the topic of this paper. Only knowing the relationship between them can we figure out whether our stock will have an increase in value during the inflation process.Through the Auto-regressive Distributed Lag analysis,and two case of inflation:2006-2008,1991-1997 of the inlation ratio and the Shanghai Composite Index, we find that inflation does have an influence in stock price and the it's negative, and the short-term influence is bigger than the long-term influence. And in one round large-scale inflation process, in the inflation initial period, the CPI temperate rise, the Stock market along with it temperate elevation, this stage is related positively; When the CPI rise starts to speed up, surpasses 104.1 to enter the obvious bloating stage, the Stock market rise also starts to enlarge. But second half of this stage, the stock market will fall before CPI begin to fall; after CPI hit the peak,it will go through a accelerating fall period and a moderate fall period until it goes into the temperate decrease sector. this stage CPI will continue to drop temperately, but the Stock market actually will have the trend which will rise temperately, will present the inverse correlation. And we analysis which section and what kind of stock behave more active during the process in order to find some investment rules.Finally this article according to the diagnosis and the case conclusion, induces some instruction opinion to investors, analysis forecast the current inflation situation and the Stock market.