| Financial market as a product of market economy, with the rapid development of China’s economy, plays an increasingly important role in national economy. And the stock market as an important part of the financial markets, with the development of information technology, financial regulation gradually relaxed, occupies an important position. Fluctuations in stock price is the objective existence of economic phenomena, the volatility of the stock market is one of the premise of the stock market development. The moderate volatility of stock price is fundamental guarantee to the survival and development of the securities market, is the foundation of the investors for capital gains and the embodiment of the value change of listed companies. How to effectively regulate the stock market, and avoid excessive stock market fluctuation bringing negative effect to the real economy and social stability, has become a problem urgently to be solved before the management.To analyze the relationship between the interest rate and the volatility of the stock market, using the stock pricing model and the interest rate transmission mechanism, the lecture finds that the interest rate’s change can impact the volatility of the stock market in theory. Firstly, the interest rate can change the enterprise’s financing costs. The decline in interest rate can improve the operating environment of the enterprise, reduce business risk and increase enterprise profit. Secondly, the interest rate as a policy signal, from the perspective of behavioral finance, changes in interest rates affect investors’ expectations, thus affect the volatility of the stock market.But the premise of these theories established is that the interest rate is determined by the market, and stock market can reflect all valid information, there is no information asymmetry and so on. But there are certain problems about interest rates and stock market in China. Such as the mechanism is not flexible, and the laws and regulations are not sound in our country’s stock market and so on. Therefore, with these problems, we maybe get the opposite conclusion with the theory of stock market volatility. This requires evidence to verify the real relationship between interest rate and stock market volatility in our country.This paper selects three comprehensive index to reflect the status of Chinese stock market including Shanghai composite index and Shenzhen composite index and CSI300index. Choosing three types of index, it can represent the actual status of the stock market. This paper selects the national interbank offered weighted interest rates, mainly for that the interest rate has eased regulation since1996, at the same time, can reflect the actual transaction costs between the financial institutions.The series of GARCH model can well predict volatility in financial time series; therefore GARCH model will be used for empirical analysis in this paper. The empirical results are as follows:Firstly, the different stock index volatility exist commonness and characteristics of itself. The Commonness is that the three index yields do not obey the normal distribution; yield sequence shows the characteristics of the thick tail. The difference is that Shanghai composite index and CSI300index does not show obvious lever effect, but Shenzhen composite index volatility presents obvious lever effect, and negative news to the stock market volatility is more sensitive than positive news, showing the investors of Shanghai composite index and CSI300index are more rational Shenzhen composite index.Secondly, the influence degree of the interest rates on different stock index volatility is not the same. Rising interest rates will increase the volatility of Shenzhen composite index; the fall in interest rates will reduce Shenzhen composite index’s volatility. But the impact on the Shanghai composite index and the CSI300index volatility is not significant.Thirdly, the effect about the lagged period interest rate on three kinds of stock index volatility is different. Lagged period interest rate affect the volatility of Shenzhen composite index, but the impact on Shanghai composite index and CSI300index is not significant. Rising interest rates increased Shenzhen composite index volatility.Therefore, we cannot single analyze the influence of interest rate on one type of stock index, because it can’t reflect the status of the entire stock market fluctuation, with different market, in conditions allowed, the government should take different measures.Although this paper inevitably studies some research method and theoretical basis from some related scholars’lessons in the writing process, but this paper has two innovation points:First, the paper empirically finds the differences of volatility between the different stock indexes; thus analyzing the effect of interest rate volatility on the stock market, through the analysis of interest rate on Shanghai composite index and Shenzhen composite index and CSI300index volatility, it reflects the sensitivity of the stock market fluctuations in interest rates.Second, the paper takes into account the time lag effect of interest rate policy, therefore introducing the average of interest rate lagged, to research whether interest rate lagged can influence stock market volatility, and verify the reliability of the empirical results. |
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