Research On The Relationship Between Stock Prices And Inflation Rate In China

The relationship between stock prices (represented by SSE Index in the paper) and inflation has been a topic of debate home and abroad. It is hoped that stock is a hedging tool against inflation, however a lot of empirical studies abroad show that stock prices did not rise while inflation rising, presenting negative relationship. But some scholars have found that under certain conditions, stock prices and inflation have positive relationship. Opposite points of view make people puzzled, which also make the author great interests to explore this topic and choose it for the thesis topic.Different from many domestic scholars, the author on the base of the theory and methodology of scholars at home and abroad, selects 1996-1999 and 2005-2007 periods to make tests, finding that stock prices and inflation have not only negative correlation but also positive correlation.The author views that the different relationship shows in different time periods .because a different time period is often accompanied by different economic conditions, and different economic conditions have different inflation performances and the factors that affect the stock price will also have different functions to stock prices, thus the relationship leads to uniformity. It is known that the economic cycle is the most complete description of economic situation, so it is necessary from the perspective of the economic cycle to explore the relationship between two. The author combines the characteristics of the domestic economic cycle and the inflation performances, from the economic recovery with moderate inflation, economic overheating with evident inflation, economic downturn with cooling inflation, to economic depression with deflation, a complete economic cycle perspective, to dynamically analyze the relationship between tow to obtain author's views.At the basis of the theory, the author uses a relatively complete economic cycle 1993-2005, by empirical test, to confirm the above proposed conclusions about the relationship between two.