An Empirical Study On The Relationship Between Stock Index And The National Economy

After the implement of reform and opening-up policy, China's economy has developed rapidly. China's stock market also has enjoyed a rapid development since the found of Shanghai Securities Exchange and Shenzhen Securities Exchange. However, contrary to classic theories, the stock index has not followed the movement of the national economy. Especially, the stock index was moving in the opposite direction of the national economy after 2001. Using co-integration test and Granger causality test, the thesis analyzes the relationship between the stock index and the national economy. The result of the empirical analysis indicates that there is no co-integration relationship between the stock index and the national economy. There is also no Granger causal relationship between stock index yield and the national economy increasing rate. With the empirical result, the thesis concludes the causes of the abnormal relationship between the stock index and the national economy.