Empirical Research On The Relationship Between China's Stock Price-earnings Ratio And Inflation Based On A VAR Model

Inflation is a major global challenges of today's intractable problems, and some countries even thus triggered a new economic crisis, and even social unrest. Not optimistic about the economic situation continued, fueling investor anxiety and worry about the capital market, China's A share market in the domestic and external environment to further downward pressure bottom, seeking support. At the same time, A-share market, the average price-earnings ratio stocks are close to record lows, the valuation of the obvious advantages, very tempting, but the performance of the stock on the secondary market that most investors are still scratching the north. The stock index which has repeatedly broken tell us that the current A-share market has been difficult to use technical indicators or patterns that can explain the theory, the current A-share market is almost entirely based on macro-oriented, then the representative of the specific Inflation macroeconomic and price-earnings ratio of China's stock between the kind of relationship, it will be the government, the financial supervisory authorities and the majority of economists are of common interest and need to address the important issue.As in the social system and the different Western countries, coupled with the relatively late start, China's securities market is still immature compared with foreign securities markets, fluctuations, large fluctuations are often perplexed that many investors. It is also because China's securities market of young, hot money making in a particular period and wanton speculation raised the price, so price deviation from its intrinsic value, the resulting price-earnings ratio of stock market bubbles will be pushed to a new level. Although China's stock market since the opening, in response to market performance on the indicators that the world has made remarkable achievements, the pursuit of development speed, development scale, development level, China's stock market in the midst of discordant voices in the former line, however, the lack of strong market monitoring and market order, the absolute standard, giving an opportunity to exploit those criminals, coupled with the quality of employees and investors are generally not high, A-share market may look very gorgeous and fresh, but in fact there are many loopholes in the system. High price-earnings ratio of stocks China's stock market has its specific historical reasons, it is not straightforward to take well-developed stock market with low price-earnings ratio of foreign and Chinese comparison. However, China's A-share market today, the average stock price-earnings ratio has not high, it is not the A-share market becomes mature, the answer is clearly no. So the market needs investors in the face of decisions, in conjunction with the current macroeconomic situation shows that the stock price-earnings ratio, rather than simply research indicators focus on technical analysis.Inflation is China's rapid economic development in the process of inevitable, but investors stock picking investment risk is controllable. So the stock market impact of inflation on stock earnings to investors and the government financial regulatory authorities is a serious problem. In this paper, the macroeconomic situation of inflation on the A-share market and stock price-earnings ratio on the relationship between empirical analysis and shows how to reduce the impact of inflation on earnings-related measures and suggestions. On the relationship between inflation and price-earnings ratio for stock research provide a basis for pricing, not just to consider the company's own operating results; for government financial regulators for the development of the stock market bubble on the stock market-related macro-control measures strong theoretical support; more importantly, can reduce the risks of blind investment, so that investors more reason to look at the market value of investments, but also the risk of resolve and prevent the stock market, curb excessive speculation, to maintain financial stability and harmonious and healthy development of China's stock market has a very important theoretical and practical significance.This article first from China's actual national conditions, elaborated about the initial development process of China's securities market and achievements, while a targeted introduction to China's current inflation situation, leads to the study of the relationship between the two motives, by domestic and foreign experts and scholars on the status of research to sort out their views and opinions are classified and analyzed to find out the advanced research ideas and methods. Then the question for this study, focuses on analysis and comparison of the theory of inflation and price-earnings ratio, and the VAR model was initially introduced. Next is the main core of this, combined with the use of Johansen cointegration tests, Granger causality test, VAR model and impulse response analysis of processed inflation (CPI) and the Shanghai A-share earnings at the end of the dynamic data empirical study found that:China's inflation and the stock market is negatively correlated with stock price-earnings ratio, short-term impact of recent years is particularly evident; but this relationship is not a balanced long-term relationship, and is a one-way inflation on short-term stock price-earnings ratio guide and predict, while the Shanghai a-share earnings is not clear on the impact of inflation, not the mutual influence between the two. Finally, for the results of empirical research, combined with China's actual conditions, proposed to curb inflation, stabilize prices and regulate the securities market development, correct and objective understanding of the market to guide investors and other aspects of policy recommendations.