The Relative Study Between Interest Rate And The Fluctuation Of Stock Index Returns Based On GARCH Model

With the further reform and development of Chinese capital market, the stock market plays an increasingly significant role in the whole macro economy. But since1990s, the countries of newly rising markets broke out series of financial crisis characterized of stock market breakdown, which tells people that the risk prevention of stock market is also significant. Meantime, the macro control that the monetary authorities of all the governments take is also the focus. Under such circumstance, how to control and prevent financial risk is the problem the government needs to face. Therefore, as the important tools of monetary policy--interest rate plays an irreplaceable part in the interaction between monetary Market and stock market. Thus, the study on the relation between both can provide the relative information for making policy; in the meantime, the policy maker can regulate the financial market in light of relative information between interest rate and the fluctuation of stock index; all these actions can have a significance on policy making, like how to prevent the financial risk and the reform of financial market.As the exact economic definition and explanation on the market fluctuation, the GARCH model is applied widely and proves to be effective. Meantime, many scholars continue to improve the model to obtain more new model similar to GARCH model which states Time-varying conditions variance sequence according to Time series tools. Recently, the study on multi-variable, multi-market and multi-GARCH model; these studies not only includes the fluctuation character of single variable, but also describes the relative relation between different variables. So far, though the many Chinese scholars study linear relationship between stock price and interest rates, few studies on fluctuation relation between both. In practice, because of the different reaction to some macro policies for stock market and interest rates and different investment behavior of market participants, both relation shows non-linear relationship, which brings new ways for studying relation between interest rates and stock market by GARCH in China.In order to test the fluctuation relation between interest rates and stock market, the thesis chooses comprehensive stock index data in closing day in Shanghai stock exchange from January1,2008to January1,2012on the basis of analysis on GARCH theory, and uses single GARCH and multi GARCH model to make an empirical study by Eviews6.0and Matlab2010a. In the view of different emphasis, the thesis will divide the study into long and short study. The short study, taking event study method, applies for single GARCH model to predict the excess profits. In light of the positive test of excess profits, the thesis researches how the interests’regulation influences yields of Shanghai securities from2008,1,1to2012,1,1, which obtains the non-positive conclusion of Shanghai securities around the times of each deposit base rate regulation. In long study, according to Cointegration method to test the long equal relation between interest rates and stock index, the thesis utilizes JB statistic variable and Q statistic variable to analyze the interest rates and stock market yields statistically. Meantime, testing ARCH action of residual sequence and asymmetry of conditional variables, on the basis of both mentioned-above, the thesis makes an empirical study on fluctuation relation between interest rates and stock market by dual-GARCH model to reach a conclusion that there is a mutual fluctuations between share price index and interest rates. In the end, some suggestions should be taken in light of empirical result of fluctuation relation between interest rates and stock market in China.The thesis has six chapter:the first chapter, introduction; the second chapter, the relative conceptions about GARCH family, interest rates and stock index, fluctuation and relative spare knowledge; the third chapter, the available and necessary analysis on GARCH model between interest rates and stock index fluctuation; the fourth chapter, the building of relative GARCH model between interest rates and stock index fluctuation; the fifth chapter, empirical test on the long and short index fluctuation between interest rates and stock index.; the sixth chapter, the result on empirical test; the seventh chapter, conclusion and extension,...