A Study On The Effect Of Interest Rates On Stock Prices

In general,interest rates are the price of capital which symbolizes the development status and degree of financial and economic markets.As we all known,the stock market volatility is a normal phenomenon for the stock market,market volatility led to changes in stock prices,stock price changes are subject to a variety of factors,including interest rate changes on the stock price is very significant.For the current study on the relationship of rate changes and stocks,most studies have argued that rising interest rates will lead to a decline in stock price,i.e.,a negative correlation between interest rates and stock prices.But from the actual reality of the Sino-US capital market reaction,are not fully consistent with this conclusion.This paper analyzes the general viewpoints of CAPM interest rate on stock price and the factors that influence the impact of stock price and the factors that may affect the change of stock price.Through the case study,this paper analyzes the influence of interest rate on stock price,establishes the model,and then based on the Capital Asset Pricing Model(CAPM),and based on the stability of the coefficients in the CAPM model,the sensitivity of the stock price is estimated,and the shortcomings of the model are elucidated by the coefficient estimation method.Consequently,a new idea is provide to explain the relationship between the change of interest rate and stock price.