Research Of Macroeconomic Factors On Stock Market Of China Base On VAR Model

China's stock market has been experienced several times of ups and downs in the last 20 years, growing from early small-scale to now national-scale. What else factors would cause the stock market rise and fall except for its own volatility. That is the main focus of this paper.The main purpose of this paper is to find which factors would cause volatility of stock market by using VAR model and other relevant methods. And propose appropriate policy recommendations on the stock market to promote healthy development and improvement by studying the reason why theoretical and empirical are not correspond.This study is divided into five parts:Part 1 is the Introduction, mainly describes significance and frame of this paper, and introduces relevant research at home and abroad in detail. On this basis, proposed methods of this study are about make innovation by summing up the previous experience. Part 2 is relevant theoretical analysis, summarized theory of stock market and economic variables linkage, and makes a detailed analysis of two aspects:theory description and theoretical introduction of macroeconomic factors on stock price. Part 3 is the reality and history research of macroeconomic factors on stock price. They have been illustrated by several charts and pictures. From charts, we can easily find out that climate index and CPI has the similar trend with stock price index, and also find out that money supply, interest rate and exchange rate do not show obvious relationship with stock price index. These results will be tested in empirical analysis later. Part 4 is empirical analysis by taking climate index, interest rate, exchange rate, CPI and money supply as variables of monthly data from 2005 to 2010. First, it describes the empirical method, introduces each empirical measurement indicator. Also a model is designed for this paper with relevant indicators and variables for empirical test. After a series of tests containing stationarity test, cointegration test and Pulse test, the conclusion is stock price do have a cointegration relation with these variables, but the relation is not correspond with theory. In order to find the cause, this paper will look deeply into four aspects:macro, company, government and investors. Part 5 is policy recommendations and further research prospects. This paper will advise correspond policies and recommendations for our stock market according to empirical results. At the same time, this paper will summed up its deficiency and makes further improvement.The innovations of this paper are:firstly, using the latest data by expanding the data to the end of 2010. Whole research is focused on the latest trend of the stock market; this will make the empirical results more representative and convincing. Secondly, this paper adopts using of multiple vector autoregressive models for analysis of multiple indicators. And finally get structural results after stationarity test and cointegration test. Thirdly, a variety of indicators are introduced into empirical analysis, which makes the conclusions more convinced.