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

Inflation is an inevitable phenomenon in the process of China's economic development,it's also an inevitable problem in the operation of a country's economy.With the continuous deepening of China's transformation and upgrading of the economic system and industrial structure,inflation and capital market,especially the relationship between the stock market and fixed income bonds have received great attention in theoretical and empirical worid.Clarifying the relationship between the two is of great significance in rolling out effective policies by the state management,planning wise investment strategies by the investors,formulating reasonable development strategies by the entrepreneurs,optimizing family financial structures by the residents.With the development of the stock market,the stock has become a common way of investment to invest.Different from foreign mature stock market,China's individual investors to enter the stock market accounted for more than 90%.Because of lacking professional knowledge,they do some stock investments is not to obtain the dividend income,but to embody the stock price income,think the stock market as the game places.Because of its limited capacity,the p/e ratio becomes effective when they choose stock index,but the p/e ratio is not an isolated indicators,it's influenced by many factors,on the basis of p/e ratio in stock value judgment should be comprehensive consideration of these factors.Although inflation is inevitable in the process of China's economic development,but the risk of investors when they choose stocks is controllable.In this paper,we study the relationship between inflation and the current stock market average p/e ratio.This article refers to the consumer price index and the Shanghai a-share market average p/e ratio from 2010 to 2015 of monthly data,using Johansen cointegration test,Granger causality test,VAR model and impulse response analysis to the empirical study of dynamic data.The results indicate that China's inflation rate and the stock market is negatively related with the average p/e ratio,and this relationship is not a balanced long-term equilibrium relationship.They are not influence each other,just the rate of inflation can predict the p/e ratio and this guide is a one-way,and p/e ratio has no obvious effect on the rate of inflation.When we put a standard deviation on the p/e ratio,inflation rate for the p/e ratio showed a weak positive reaction.Finally,accordingto the results of the empirical research conclusions,combined with China's actual situation,proposed relevant policy Suggestions.