The Study On The Correlation Between Consumer Confidence Index And Stock Price Index In China

The status quo of irrational investment and inferior effective market have led toserious problems in China’s such as low stock price, lack of confidence in investors, etc.Traditional analytical method can no longer provide ideal interpretation of the fluctuationof stock market and stock prices, therefore scholars turn to other directions for a “ThirdMiddle Way”. The editing and publishing of China’s consumer confidence index providenew perspective and thoughts for the study.Based on former researches, the researcher takes the monthly data of three consumerconfidence indices and two stock price indices of China as the data for the present study.Unprecedentedly, data in the period from November2003to December2013are chosen asthe overall sample, and data from November2006to October2007(a rising period of thestock market) and from November2007to October2008(a falling period of the stockmarket) are chosen as two sub-samples. Methods like correlation text, causality text,impulse response index, variance decomposition, comparison between the overall sampleand sub-samples, induction of different samples, etc. are applied in the study. Conclusionsare reached that there is strong correlation between consumer confidence index and stockprice fluctuation, and that consumer confidence index has good predictability. Furthermore,data analysis of the overall sample and sub-samples show that correlation betweenconsumer confidence index and stock price index in the falling period of stock market isstronger than that in the rising period of stock market, and thus consumer confidence indexin the falling period has more reference value.