A Research On The Relationship Between Stock Price And Macroeconomic Variables Based On Vector Autoregression Model

As a key factor of economic activity and development, the efficiency of capital allocation essentially decides the process and future of a national economic development. So, the development level of a national capital market definitely indicates the level of this national economic development. How to test the relation between stock market and economic development is a new topic of the economic development theory. The relation between stock market and macroeconomic variables is also one hot issue in scientific research nowadays. Not only the inherent value of stock, but also the macro economy affect stock price. One hand, macro economy affect the tendency of stock price, on the other hand, the stock price index is a leading indicator of macro economy.Firstly, this paper analyzes the relation between stock market and macroeconomic variables from theoretical perspective. Secondly, using vector auto regression model, this paper analyzes this relation from empirical perspective. Results from empirical analysis indicate that there exists a long run equilibrium relationship between stock price index and various macroeconomic variables. The development of stock market is consistent with the development of macro economy in principle; the stock price index can reflect the tendency and level of macroeconomic development. The short-run fluctuation of stock price index is affected by added industry value, money supply, inflation rate, interest rate, and so on. But the Granger cause relationship between stock price index and macroeconomic variables is not significant, and the linkage between stock price index and added industry value is weakly. So, the stock price index cannot entirety reflect macro economy. Lastly, policy recommendations are also provide based on empirical study.