Study On The Impact Of Raised Deposit Reserve Ratio On The Shanghai Stock Market's Banking Sector

From 2010 to 2011, In order to alleviate the domestic economy overheating, the central bank frequently raised the deposit reserve ratio. Increased by 12 times, the China's reserve ratio raised from 16% (large financial institutions) and 13.5% (small and medium sized financial institutions) to 21.5% (large financial institutions) and 18% (small and medium sized financial institutions). Central Bank so frequently adjusted the deposit reserve ratio. On one hand it shows the Determination of government to curb economic overheating. On the other hand it reflects that the role of the deposit reserve ratio as an important monetary policy tool gradually be taken seriously.As the primary means of monetary policy, the deposit reserve ratio has an important impact on the implementation of monetary and macroeconomic policy. Especially in recent years, from the international financial crisis to the recent increase in domestic inflation, central bank adjusted the reserve rate several times. At the same time China's stock markets, especially banking stocks has been impacted. At this time the study of the relationship between the stock market and deposit reserve ratio is particularly meaningful. This paper uses event study on how the deposit reserve ratio impacts the banking sector. Event study is to use a specific technique to measure the impact of the event based on the period before and after the incident. This paper uses 10 typical information announcements as a sample, using market modal to estimate the normal rate of return, using the SPSS software to estimate the normal return model's parameters, using t-test to make significance test of AAR and CAAR. Through this empirical research can get the following conclusions:First, when the event day is the implementation date, the t-values are not significant. Only when the event is monetary policy announcement, the market has a significant reaction. Second, the impact of central bank increasing deposit reserve ratio on the small and medium financial institutions is greater than the large financial institutions. Third, there are some expectations in the market on the market rate adjustment. Fourth, the central bank adjusts the deposit reserve ratio is to alert the commercial banks to pay attention to lending rhythm. The impact of the market itself is relatively limited.In order to better control liquidity, make the macroeconomic to be sustained, there are some recommendations to make the deposit reserve ratio policy play a better role. First, the Government should implement a variety of monetary policy mixed to strengthen co-ordination.'Second, the Government in the implementation of monetary policy, should note to use other macro-control policies mixed. Third, central bank should improve the reserve system, to speed up the reform of the reserve system. Fourth, the Government should speed up the interest rate market. Fifth, the Government should expand the size of stock market liquidity to encourage more eligible companies listed, so that monetary policy can further affect the stock market.