The Application Of Causality In Stock Market

In this paper,we use the New Causality(NC)and Granger Causality(GC)theory to do some empirical research on some variables in the economic field,and try to find the same and different points between the NC and the GC when the two method is used in the economic field.Through the specific economic variables,we try to expand the application areas of the New Causality,and find the advantages of its application over GC in the economic field.This paper chooses two variables as the research object,one is the causal relationship between CSI 300 Spot and its index futures,the other one is the causal relationship between four weight stocks(Petro China stock,ICBC stock,Sinopec stock and China Ping An stock)and the Shanghai Composite index.The causal relationship between stock index futures and spot is always a hot spot.But the causal relationship between these two variables is based on GC so far,there have not been a causal relationship between these two variables using the NC.In the use of the GC method because of the research methods,the study object and the research event interval,different scholar get different results.The impact of the weight stock is self-evident,the weight stock can even determine the trend of the stock market,so the study of finding the causal relationship between the weight stocks and the Shanghai Composite index is very meaningful.In the study of the causal relationship between CSI Spot and its index futures,the two section of the data is selected.one is from June 25,2011 to June 15,2012.another period is from November 5,2012 to November 5,2015.Firstly we use GC and NC to find the causality relationship between the CSI 300 Spot and its index futures for entire data set.The results by both methods reveal that the causal influence from CSI300 index futures to CSI 300 Spot is much greater than that from CSI 300 Spot to CSI300 index futures.We then calculate the rolling causality using two methods.The GC results show that the causal influence from CSI 300 index futures to CSI 300 Spot is always much greater than that from CSI 300 Spot to CSI 300 index for the two data.But the NC shows such characteristics only in most of the time.The stock market is changing very fast.We think that the CSI300 index futures in 5 years for each rollingwindow may not always have an impact on the CSI300 stock index spot.So we think that maybe the GC does not reflect the real causal relationship between CSI 300 and Its index futures,and the NC is consistent with the truth.In this way,we actually demonstrate that NC is better than GC to reveal true causality of one system.Anyway,both methods demonstrated that CSI 300 index futures has a major causal influence in CSI 300 Spot.Finally as the window size increasing,almost all the window is the window that the causal influence from CSI 300 index futures to CSI300 Spot is always much greater than that from CSI 300 Spot to CSI 300 index by using GC method.It mean that CSI300 index futures can determine the CSI 300 Spot and obviously it can not be true.But by using the NC the max rate of the window like that is about 95% and this may be true in practice.In this paper we try to find the causal relationship between the weight stocks and the Shanghai Composite index.this paper explores the causal relationship between each weight stock on the Shanghai Composite Index,and according to the characteristics of the new causal relationship,the paper examines the causal relationship between the joint weight stocks and the Shanghai stock index.In this paper,we only discuss the causal relationship between each weight stock on the Shanghai Composite Index because of the limitation of GC.We found that the greater the weight,the impact on the broader market is also relatively large,which is the same as we expected.