Empirical Study Of Chinese Stock Index Return And Money Supply

The change of money price reflects the change of capital cost,and thus the final return of capital.In 2017,China's steady monetary policy was tighter than that in 2016.In October 2018,the central bank began to reduce the benchmark interest rates on loans and deposits.What impact did these have on China's economy?It is worth thinking in which industries the tightening monetary policy plays the most significant role and how the performance of each industry reflects the performance of the whole macroeconomy.The main purpose of this paper is to study the relationship between different industry index returns and the monthly change rates of money supply.That is,by establishing Markov Switching model to analyze how money supply changes affect capital returns on industries indices,this paper aims to figure out if there exists any correlation between industry index returns and monthly change rates of money supply and how the correlation varies from industry to industry.In order to make a better comparative analysis,this paper uses different kinds of industry stock index rates data.All in all,this paper show that the relation between monthly change rates in money supply and change rates in industry indices differs from different industries.The specific relation of money supply change rates and industry index returns should be analyzed not only in different sectors,but also in different stock market conditions,as different industry indices have different market characteristics.The change of money supply has the most statistically significant correlation with the financial industry stock index.For the consumption industry index and construction industry index,the correlation is very significant in one or two stock market conditions.While in the other market conditions,the correlation is not that statistically significant.In addition,the correlation can be positive or negative.This paper show that this seems to be related to different stock market conditions.