A Study On The Correlation Between Unemployment Rate And Stock Market Composite Index

The emergence of the stock market is an important milestone of economy and social modernization, it is also a important product generated in in-depth development of commercialization, monetization and credit. The stock market greatly liberates and developes social productive forces, promotes the rapid development of social economy.The unemployment rate is also an important index to measure the level of economic development. Someone believes that there is a negative correlation relationship between stock price index and unemployment rate. You will care about subsistence level most and change the original savings and investment into consumption when you lose your job. Then the overall amount of capital which you invest into the stock market will be shrunk, this leads to the decrease of the corporate profits, especially felling of stock index.The empirical analysis of the United States data proved that there is a strong negative correlation relationship between the unemployment rate and stock index. This is not a simple linear relationship. Granger causality test shows that the stock index is the cause of unemployment. So, the stock market in the United States is the barometer of economic, which can be sensitive to reflect the development and changes of the U.S that reflected in the unemployment rate.This paper make an empirical analysis of United States, Japan and China’s stock market index and unemployment rate. The results show that the data and test of United States can verify the negative correlation between unemployment rate and stock price index, but the data of China and Japan can not prove this negative relationship.