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Empirical Research On The Relationship Between China’s Stock Price--earnings Ratio And Inflation Rate

Posted on:2014-04-05Degree:MasterType:Thesis
Country:ChinaCandidate:W J YuanFull Text:PDF
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Inflation is the inevitable problems in the operation of a country’s economy, if the shadow of inflation is lingering, the development of the national economy will face great pressure, could trigger a new round of economic crisis, and even social unrest. And the close relations between inflation and development of stock market will make the stock market face a lot of uncertainty, and then affect the outlook of the stock market and the confidence of investors, China’s A-share market in the domestic and external circumstances to further downward pressure bottom, seeking support. The average price-earnings ratio of A-share market continuously hit new lows, this is very attractive to investors, But from the past performance of market, we can see that investors benefit nothing from the stock market, thus we can see the current China’s stock market has been hard to use technology form theory to explain, the macro economic factors play a important role in it. Because our country’s social system have very big difference with the western developed countries, along with a short and young history of our country’s stock market, in order to pursue the rapid development, the market supervision and legal norms are not sound, A-share market looks gorgeous and glamorous, but in fact there are a lot of loopholes, giving an opportunity to exploit those criminals. The high price-earnings ratio of A-shares has specific historical reasons, so we can’t simply compared with the developed stock markets abroad, though the current ratio is not high, it does not mean the A-share market has become mature. Therefore investors can’t simply rely on technical indicators when making investment decisions, they must consider from more aspects, and in combination with the current macroeconomic situation, finally make the careful decision.The healthy development of the national economy and the smooth running of securities market are a good thing for both investors and government regulators, and the study on the relationship between the two essential index is conducive to co-operation of the two things, and can provide a basis to stock pricing, and not only to consider the company’s own operating performance, the inflation rate can also be used as a reference of these factors, and taking the macro-economic bubble into account can make the stock pricing more objective and justice. Financial regulatory authorities can judge the level to bubble of the stock market, and will have a general understanding of the overall market, then puts forward effective measures for irrational speculation in the market, prevent the stock market ups and downs, ensure the security market develop steadily, and can help investors decide effectively, reduce the risk of blind investment. Price-earnings ratio is a comprehensive measure to the potential growth and profitability of stock, therefore it is the preferred index when investors invest, but if the price-earnings ratio has been in a state of disorder, separated from the contact with the intrinsic value of the stock, it will mislead investors, and caused a great risk.High economic growth is always accompanied by higher inflation, not just in China, in any other country will also appear this kind of phenomenon, but to different levels. Consumers are unable to control the inflation, but as an investor, the investment risk of the stock market is controllable. So investors need to clearly understand what kind of relationship between Chinese stock market price-earnings ratio and the inflation rate? Can the investors forecast the change of price-earnings ratio according to the changes of the inflation rate in the macroeconomic environment? This paper makes an empirical study of the relationship between the inflation rate in the macroeconomic environment and the A-share price-earnings ratio. First, starting from the actual situation of our country, then briefly describes the development situation of China’s securities market in recent years, and describes the current form of inflation, explains the reason why I study the relationship between the two, after that cards the study of literature at home and abroad, and summarizes the research methods and conclusions of these literature. Then aiming at the problem studied in this paper, mainly introduces the theory of price-earnings and inflation, and then methods related to this application are briefly introduced, next is the core part of this paper, aimed at the two indicators, I do unit root test, co integration test, Granger causality test, then make a vector autoregressive model and the impulse response analysis, from the actual situation of China’s securities market and macro-economy, the two indexes are analyzed quantitatively and qualitatively. From the research I found that:The average inflation rate and the average market price-earnings rate is negative correlation in our country, and is a long-term equilibrium relationship between the two, but it is not influence each other, just the inflation rate can predict price-earnings and this guide is one-way, and price earnings ratio has little effect on the inflation rate. Finally, according to the empirical study conclusions, combined with China’s actual situation, proposed advice to curb inflation, stabilize price, and perfect the construction of securities market, then guide the investors to correctly understand the stock market etc..
Keywords/Search Tags:the price-earnings ratio, co-integration test, Granger causality test, VARmodel, impulse response analysis
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