An Empirical Study Of Relationship Between Monetary Policy And Stock Price Of China

As early as the fifteenth century in Europe there have been companies through commercial credit activities of banks indirect financing, initially produced is the result of capital markets to develop commercial credit, but also the stock and the market economy develops to a certain stage of the product. US-led capital markets was born in the19th century led to the economic and social development, the U.S. high-tech industry also benefited from Wall Street’s financing M&A activity has made the world leading position. After the reform and opening up, along with the rapid development of China’s market economy, China’s securities market came into being, has set up the Shanghai Stock Exchange and Shenzhen Stock Exchange, the stock suddenly become the focus of attention, the national capital of the country to the stock market continued stream of collection, flourishes most investors will become the dream of rampant speculation atmosphere. At the same time, how to maintain a healthy and stable development of the stock market has become the focus of attention of the monetary authorities, so research the relationship between monetary policy and the stock market is of great significance, but also for the monetary authorities to provide decision support in the formulation and implementation of monetary policy. This article from the perspective of empirical analysis starting with a study of whether the monetary policy variables and the causal relationship between the stock price to build econometric models, the major innovation of this paper is from the perspective of event study analysis reserve one of the three magic weapons of monetary policy Kim declared policies have a significant impact on whether the stock price.In order to study the relationship between monetary policy and stock prices, the paper used the VAR vector autoregression model and empirical analysis of two case study method. In establishing the VAR model, select the inter-bank offered rate, residents of the consumer price index, all levels of the money supply, the Shanghai index’s price several variables to analyze the equilibrium relationship between them, and draw on the Shanghai Composite Index change was caused by the consumer price index and Granger causes the narrow money supply M1change this conclusion. When using event analysis study deposit reserve policy announcement is a significant impact on the stock price, choose the stock market since the establishment of the central bank deposit reserve ratio to adjust the data and abnormal returns on the adjustment after the Shanghai index were significant test, too the conclusion is that raising the deposit reserve ratio policy declaration yields a greater impact on the index than the declared cut the deposit reserve ratio, but not particularly significant. This article includes a total of eight chapters, the specific structure is as follows:The first chapter, Introduction, say v. research background and significance of the topic, and the structure and framework of this paper, a brief introduction.The second chapter, literature review, describes the methods and conclusions of scholars to study this problem when used to analyze current research, provide ideas and references for the methods used in this study.The third chapter describes the relationship between monetary policy and stock prices theoretically, including how the conduction of monetary policy to the stock market, and monetary policy affect stock prices.The fourth chapter analyzes the transmission mechanism of monetary policy in the stock market, including Tobin’s q effect, the wealth effect, corporate balance sheet effects, household asset portfolio liquidity effect.The fifth chapter of the history of the development of China’s monetary policy will be introduced and the relationship between money supply and stock prices were between brief descriptive analysis.Chapter VI choose money supply and interest rates as a proxy for monetary policy, and also joined the factors that affect stock price inflation rate for the variable, analysising whether the existence of long-term stable equilibrium relationship between money policy and stock prices, whether a causal relationship and the establishment of a VAR Vector autoregression model and impulse response function test the impact on stock prices random disturbance between Granger causality test to verify both.Chapter VII, whether the use of a significant impact on the stock price when the change RRR event study tested the central bank. Chapter Ⅷ, the results verified by empirical analysis of wehther the monetary policy transmission mechanism is smooth in stock market, investment operations made recommendations to help investors develop coping strategies, optimize the structure of financial assets, reasonable risk-averse, to get higher returns.