A Study On Industry Wheel Moving And Transmission Mechanism Of A-share Market In China’s Business Cycle

With the development of China’s economy and investor psychology, sector investment strategy is well supported. To understand the impact of economy fluctuation on stock market and to outperform the whole market is the main problem. This paper draws on the analytical framework of investment clock theory raised by Merrill Lynch, trying to grasp the external environment of equity investments by analyzing China’s business cycle and analyzes the industry wheel moving and transmission mechanism of China’s A-share market to acquire an investment clock appropriate to China’s A-share market so as to instruct investors to gain profits better than the overall market.The Paper, firstly, makes a study on regular movements of three crucial indexs-growth property, investment and currency, and inflation-in business cycles, and divides the last ten years of China’s business cycle into two economy periods. Next the paper moves on to the virtual economy, China’s A-share market, to analyze the performance of the market in the perspective of industry wheel. It is proved that the point of this paper is supported by the rational expectation theory and efficient market hypothesis, which can be well explained by the DDM model. This paper also gives optional sectors in each period, based on the daily data and performance of CSI twenty five level-two industries in Shanghai and Shenzhen market. At the end of the paper the author comes up with a new idea of investment clock in Chinese stock market and answers three questions concerning a complete investment clock model: how to define different phrases in the economy cycle, how the fluctuation of economy transmits to the capital market, and how to allocate assets in different phases.