China's Stock Markets Empirical Analysis Based On The Garch Model And The Var Model,

There is close relationship between state of the economy and the stock market in the country which has Highly developed financial markets. China's stock market has developing for 20 years. Does it reflect the National economy through its Price index? This paper apply the theory of econometric model to stock market research. It consists of two parts. The first part is study Changes in the stock market itself,using generalized autoregressive conditional heteroskedasticity model; the second part is Study the interaction of monetary policy and stock, using vector autoregression model.In the first part, I Select the Shanghai Composite index for the study. Founding that the phenomenon of fluctuations in groups,and using ARCH LM test, we creat GARCH(1,1)model,and predict at the same time. The sum of Model constraint coefficient is approximately equal to 1, indicating that the impact on conditional variance is enduring, which play a early warning role in the future predict. The model has the accurate reflection of market volatility and forecasts exactly while the errors are 0.19% and -0.36% in turn.In the second part, Adding two economic indicators:the broad measure of money supply(M2) and one-year statutory deposit interest rate of financial institutions. After ADF test and Granger causality test, I establish a VAR model and forecast accordingly. Where equation (4-1) verify the change in the current stock market is more affected by itself once again; equation (4-2) fit the highest, which means our country's macroeconomic variables are affected by the stock market more. The impulse response function analysis and variance decomposition based on the VAR model show that the Impact of monetary policy variables on the stock market is weak, and the interest rates have relatively Greater impact. Further,Johansen cointegration test confirm that it does not exist long-term equilibrium relationship between monetary policy and stock market. I use The Theory of Financail hoarding to explain Empirical results.