The Fisher Effect Test On China's A-share Market Based On Str Model

As one of the most important part of the capital market, the stock markets of all countries have an increasing influence on the economic development. The stock market has become a barometer of national economic development. China developed the stock market later than those developed countries. However, our domestic stock market has reached a certain scale and played an important role in the economic development and reform. More and more ones and institutions use stocks to preserve and increase their assets. However, there are many arguments on whether the stock market can resist against inflation.Among all the theories on the relations between the asset gains and the inflation, the most famous one is the hypothesis on the relations between the real interest rate and inflation rate, proposed by Fisher in 1930, which is known as 'Fisher Effect Hypothesis'. He thought that the real yield rate of assets was not affected by the inflation rate, that is to say, the nominal yield rate is equal the real yield rate of assets plus the inflation rate.'Fisher Effect Hypothesis'was concerned by all the theorists since its emergence. Many scholars want to explain and verify the hypothesis from both theoretical and empirical aspect. However, the results are not good. On the contrary, they reflect the significant negative correlations existed between the assets yield rate and the inflation rate. The phenomenon is known as 'Fisher Effect Paradox'. Around how to explain and test the'Fisher Effect Hypothesis', scholars from various countries proposed a lot of theories and methods and produce a large number of relevant documents. However, there are still deputes on whether it is right or when it is right.Firstly, in response to those problems, the author breaks the inflation rate into expected inflation rate and unexpected inflation rate. Based on the previous studies, the author uses the linear assumption to test whether the'Fisher Effect Hypothesis' suitable for Chinese stock market. It is displayed that the negative correlation existed between the inflation rate and the stock return rate. That is to say,'Fisher Effect Paradox'is also existed in our domestic stock market. Secondly, considering the large existence of the nonlinear changes of the economic time series, the author uses the developed STR model to analyze the relations between the inflation rate and the monthly yield rate of the stock. It is supported that the'Fisher Effect Hypothesis'is still unsuitable for our domestic A-share market under the nonlinear hypothesis. Finally, the author suggests some investment strategies and measures to develop our stock market.