The Interest Rate Adjustment Is Not Part Of The Stock Market Is Expected

The adjustment of monetary policy rate is one of the most important influencing factors to Stock market, this change has aroused the market participant widely interesting. Investors will always be based on the economic status to form the expectation of interest rate and reflect it in the current stock market. As the policy rate adjustment's strength and timing are very difficult for the market participant to grasp, so there is always existing bias between the real rate adjustment and the expectation. This bias is just of the unexpected part of the interest rate adjustments in the market, and which affect the stock market earnings, volatility and liquidity on the announcement date. Existing studies about this field in the country showed that most researchers adopting the event-analysis method, from which they got the inferential conclusions about the abnormal performance of the stock market. But these conclusions were not entirely consistent. For this reason, decompose the expected factor from the interest rate adjustment become very important.Through the long-term stability relationship between the one-year deposit interest rate and the one-month inter-bank lending rate, transformed deposit interest rate's policy adjustment into one-month inter-bank lending market target interest rate change. The forward interest rate which implicit in the different period inter-bank lending rate, decomposes the target interest rate adjustment into expected part and unexpected part. Using the simple linear regression, GARCH model and the various liquidity indicators, analyzed the impaction of interest rate adjustment to stock market. The study found that the unexpected part of rate adjustment reverse to Stock market's returns, but with the same direction change to the volatility and liquidity. In the announcement-trading day, the abnormal intraday price is the stock price of the self-call-back to the stock price of overnight which responded excessively to the unexpected part of rate adjustment. Also found that the impact of monetary policy on Stock market is not only subject to the direction and the intensity of rate adjustment, but also affected by the economic background.