Bayesian Study Of Impact Of China's Macro-economy To Hong Kong And Shanghai Stock Market

As an important part of China's economic system, the healthy development of the stock market has become a prerequisite for stable and rapid development of China's economy and the position of the stock market is increasing in macro-economy. Overall, macroeconomic fundamentals affect the development of the stock market to some extent and its specific fundamentals are reflected by the main macroeconomic variables. Understanding the impact of macroeconomic variables on stock market economies is to ensure a sufficient condition for the healthy development of the stock market. Because China's stock market starts late, the development is not yet mature. As an emerging market, coupled with the interference of external factors, stock market leads to a certain degree of deviation between the market volatility and the trend of macroeconomic variables. These deviations are likely to affect the normal function of the stock market causing the stock market bubble or panic investors. In order to promote positive interaction between macro-economy and stock market and fully reflect the impact of changes in the structure of macroeconomic volatility on the stock market, this paper uses macroeconomic variables and the index of Hong Kong and Shanghai stock market, introduces Markov process, proposes a Bayesian Markov regime switching VAR model and reveals the changes in stock market under different degrees of inflation based on Bayesian VAR model based on theoretical analysis and empirical test. The results suggest that Bayesian inference method describes the dynamic relationship of influence of macroeconomic to stock market more accurately and inflation has a positive effect on the stock market. BVAR model takes advantage of its prior distribution and selects a small sample to effectively detect the dynamic impact of the macroeconomic volatility on Shanghai and Hong Kong stock market resulting desired predictions; The inflation has a strong pull effect on the stock market, imports and exports followed by inflation and the role of these effects on Hong Kong stock market is more significant; moderate inflation is more conducive to the development of the stock market related to the state of high inflation; Therefore, the government should adjust inflation rate so as to improve the development of stock market.