The Research On The Supply And Demand Of Capital,the Stock Price Fluctuation And The Sustainable Development Of Stock Market

Although China’s stock market started late,it has developed rapidly,and now it has become a hub connecting all aspects of society.However,compared with several mature stock markets in the world,China’s stock market has a weak growth and small-stock market crash,which not only goes against the guiding ideology of sustainable economic development in China,but also seriously endangers the interests of listed companies and investors.This paper studies the interaction between capital supply and demand and stock price,which provides a basis for the regulatory authorities to formulate policies to promote the sustainable development of China’s stock market.Firstly,this paper elaborates the interactive mechanism between the supply and demand of capital and the impact mechanism of stock price on the basis of referring to the relevant research results at home and abroad.It shows that the relationship between capital supply and demand will directly affect the stock price,while the stock price will influence the capital supply and demand by influencing the investor expectation.Secondly,this paper analyses the current situation of the capital supply and demand and the stock market.The stock market of our country shows the characteristics of weak growth,uneasy fluctuation and constant small-stock market crash.The demand for capital is huge,while capital supply shows such characteristics that individual investors dominate the stock market,resulting in instability of capital supply.Finally,after considering the development of China’s stock market comprehensively and considering the characteristics of this paper,we choose the Shanghai Composite Index(Index)as the representative of the overall stock price trend of China’s stock market,the total amount of domestic financing(Tdfa)as the representative of capital demand,the value of institutional ownership of the stock market(Ins)and the number of new additions of individual investors in the current period(Retail)as the representative of capital supply.And then,we use full-sample Granger causality test and Sub-sample rolling window causality test to empirically study the interactive mechanism between capital supply and demand and stock price from both long-term and short-term dimensions.It is found that there is an asymmetric causal relationship between capital supply and demand and stock price in the long run,but this causal relationship will change and show different characteristics with time in the short run.The main conclusions of this paper are as follows: In the long run,(1)the fluctuation of capital demand can not cause stock price fluctuation significantly,and stock price fluctuation is Granger’s cause of capital demand.(2)The change of institutional investors’ capital supply can cause stock price volatility significantly,but stock price volatility can not cause the change of institutional investors’ capital supply significantly.(3)There is a long-term interactive relationship between individual investors’ capital supply and stock price.In the short run,(1)In the immature development of the stock market,blindly issuing shares to expand the size of the stock market will lead to a downturn in the trend of the stock index.And the effect of reducing stock supply to promote the trend of stock index is not obvious.(2)The rise of stock price index will increase stock supply in the short term.(3)The effect of institutional investors’ capital supply driving stock price index gradually weakens with the decrease of its proportion.In addition,institutional investors in China will aggravate the instability of the stock market.(4)The trend of stock index will affect institutional investors.(5)Individual investors have very limited impact on the stock index.It is not wise to reduce the number of individual investors to raise the stock index.(6)Individual investors’ expectations will be significantly affected by the stock index,and there is a phenomenon of "blindly gamblel".Based on the above analysis,this paper provides some pertinent suggestions for promoting the sustainable development of China’s stock market: On the one hand,we should stabilize the stock supply,including standardizing the equity financing system,improving the efficiency of capital use and improving the delisting system;on the other hand,we should optimize the structure of capital supply,including expanding the scale of institutional investors and guiding individual investors to make long-term investments.