China Stock Market On The Central Bank's Monetary Policy Announcement Effect "

This paper concerns on the reaction of the stock market to the monetary policy of the central bank, tests whether there is a statistically announcement effect through practical data in china. The author chooses the Reserve Requirement Ratio and the benchmark Deposit and Lending Rate of RMB as studying variables. The research period is from May 1993 to Jan. 2008. The main conclusions are as follows: The Reserve Requirement Ratio has no announcement effect to stock market, but the Deposit and Loan Basic Rate of RMB has lag announcement effect and has no advance announcement effect. The internal reason is that the Reserve Requirement Ratio is a quantitive monetary policy tool while the benchmark Deposit and Lending Rate of RMB is a price-based monetary policy tool. And in this paper, the changes of Deposit and Loan Basic Rate of RMB are divided into positive changes and negative changes, we find that the positive changes have greater influence to the stock market than the negative changes. The possible reasons are the different economic circumstance for the two kinds of changes. We also find that even anticipators in the stock market try hard to forecast the direction of monetary policy of the central bank, the stock market still reacts to the announcement of the monetary policy. So the adjustment of monetary policy of central bank contains some new information, and these new information has not included in the current stock price.