The Study Of Relationship Between Stock Prices And Inflation After The Equity Division Reform In China

Price stability is one of the main goals of macro economy in a country. With the rapid development of the stock market, the stock price fluctuation with the real economy are closely linked, so what kind of relationship between stock prices and inflation is also a hot topic which is researched and focused by domestic and foreign scholars. Since the establishment, the stock market has been rapid developed in China, The stock is becoming more and more common and it was known by people as one the financial assets.So this article will study the correlation between stock prices and inflation.This article selects the Shanghai composite index(SZI) and the consumer price index(CPI) monthly data after the equity division reform in China.The data was put in subsection according to the major events,then doing the analysis using the segmented data and the overall data.The Shanghai composite index is to measure the stock price fluctuations, the consumer price index is to measure the degree of inflation. The relationship between the change of stock price and the change of price situation was discussed in subsection, The conclusions are :The change of stock prices and the change of inflation are basically consistent, besides some hysteresis;After the adjustment of the calculation of the CPI, the amplitude of the stock prices and inflation became smaller. After the opening of the link of Hong Kong and Shanghai exchanges,the trends of the SZI and CPI were obviously inconsistency.This paper selects seven variables as the consumer price index, inter-bank interest rates and money supply M1 and M2, the Shanghai composite index, the total fixed assets investment and total retail sales of social consumer after the equity division reform in our country.Then building the vector auto regressive model, and impulse response function and variance decomposition analysis, the conclusions are: After the equity division reform in China, there exists short-term forecasting between stock prices and inflation;The wealth effect is more obvious than investment effect in Chinese stock market.;Choosing the different intermediary target variable in the monetary policy,the monetary policy will bring the different effect on SZI and CPI;Chinese stock has a certain value in the period of inflation in the long-term.Finally some policy Suggestions were put forward.