Comparative Analysis Of The Correlation Between Chinese Macroeconomic And Stock Market

The stock market is an important part of the national economy, its developmentplays a critical role in national economy, at the same time, the operation of the stockmarket is restricted by the developing situation of the whole national economy. Thelevel of the economy often determines the development of the stock market,meanwhile, the rise and fall of stock market directly reflects the development of themacroeconomic. Many studies shows that such as Europe and the United Stateswhich own a mature market economy, the long-term relationship between theoperation of the macroeconomic and the basic trend of the stock market is consistent,namely, the operation of macroeconomic and stock market volatility has a certainsynergy relationship. As a leading indicator of the development of national economy,stock market play an important role in grasping the macroeconomic situation, inguiding the government to make corresponding economic policies and leading theinvestors to invest properly.Compared with western developed countries, the history of Chinese stockmarket is just20years until now. There is a large gap between Chinese stock marketand western developed countries when considerate the history of the stock markets,the composition of investors and supervision level. From the point of Chinese stockmarket and macroeconomic operation, the function of the stock market, which as aleading indicator of national economy, has not been reflected.This paper is based on previous studies. Discussing the correlation betweenChinese macroeconomic and the stock market. The thesis is divided into two parts:theoretical research and empirical analysis. Theoretical research pays major attentionto the review of theory and literature about macroeconomic and stock market, whichlays a theoretical basis for the empirical analysis. Empirical analysis contains twoparts, the first part is cycle theory, analyzing the graph of1992-2013Chinese annualGDP growth rate and the closing index of Shanghai composite index, withcomparison of figures of the United States at the same time, found that alignment ofChinese macroeconomic and the movements of stock market during this time is onlyabout40%, while the United States is72%; at the same time, the cycle of macroeconomic is different from the stock market. However, the macroeconomic andthe stock market in America shared the same number. The trend of Chinese stockmarket is greatly deviated from Chinese macroeconomic situation. The second part ofthe empirical analysis is based on the VAR (VEC) model, which is used to explain thecorrelation analysis of Chinese macroeconomic and the stock market. Model analysisis divided into longitudinal comparison and horizontal comparison; Horizontalcomparative analysis refers to the comparison of China and the United States,because America has developed and mature market economy and efficient capitalmarkets.establish VAR (VEC) model by using1992-2013quarterly GDP data ofChina and the closing index of Shanghai composite index at the end of the quarter. Inorder to do comparison and analysis, the quarterly GDP data and the closing price ofthe Standard&Poor’s500Index at the end of the quarter are selected as the sampledata for VAR (VCE) model analysis at the same time. Longitudinal comparativeanalysis refers to the cut-off point of the equity division reform in China in2005, theperiod during2005-2013which is after the equity division reform is called “the late”,the period from1996to2004which is before the reform is called “the early”. Chinesemonthly GDP data and the closing index of Shanghai composite index at the end ofthe month are selected from “the early” and “the late” to establish VAR (VEC) model,respectively.The conclusions of the study are as follows: Horizontal comparative analysisshows, the efficiency of Chinese stock market is low. Chinese macroeconomic canrespond rightly to stock market’s volatility, but Chinese stock market can’t respondcorrectly to macroeconomic; the correlation between Chinese macroeconomic and thestock market is very weak, and major problems lie in Chinese stock market. Thelongitudinal comparison shows, the impact from Chinese stock market to Chineseeconomy is enhanced; but the problems existing in Chinese stock market have notbeen improved obviously.