| Studies on the stock market of developed countries have shown that stock price index has the role of barometer of macroeconomy and there exists the close relationship between macroeconomic variables (such as interest rates, consumer price index, money supply, etc.) and stock market. With the development of more than 20 years, stock market has become an important capital market and it functions as the important place to finance and allocate the capital. The domestic enterprises gradually change the situation which heavily relies on bank finance. Based on the theoretical basis and some countries' case studies, this paper empirically analyzes the relationship between Shanghai stock composite index and China's GDP, the RMB against the U. S. dollar, the consumer price index as well as M2 by utilizing the VAR model.This paper concludes that in the period of 1996-2010, the GDP growth rate can result in changes of the Shanghai Composite Index in Granger. The positive impact on GDP growth rates will promote the rapid growth of M2 in the early period, but with the economic situation tends to be stable, the fluctuations of M2 decreases, and the fluctution time increases. The positive impact on the Shanghai Composite Index will cause the GDP growth rates moving to the opposite direction and this proves that China' s stock market is not consistent with the overall economic situation. Therefore, China's stock market can be obviously affected by the overall economic situation and this is in line with the regularity of stock market development. On the other hand, the empirical result is inconsistent with the view that the stock price index reflects macroeconomic situation. At last, this paper provides some policy suggestions such as establishing a reasonable macro-control target with consideration about financial asset price, setting up the stock stabilization fund to weaken stock market fluctuation, further facilitating the development of China's stock market. |
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