The interest rate is one of the main tools used to control monetary policy in China. Changes in interest rates will affect the return on capital and the financial situation of enterprises, which will in turn have an impact on the stock market. What effect will interest rate adjustments have on the stock market? Are fluctuations in the interest rates and the stock market correlated? At present, there is no consensus on the answers to these questions. This paper studies these problems. In order to study the effect of the interest rate adjustment on the stock price index, this paper first conducts literature review and analysis, and then uses unit root test, Johansen integration test, Granger causality test and error correction model. The factors studied are the one-year deposit rate and the closing price of the Shanghai Composite Index from 1991 to 2015. It can be seen that the long-term relationship between the interest rate and stock prices is a reverse relation - when interest rates change, the stock price is adjusted in reverse. Specifically, (1) there is a long term reverse relationship between the interest rate and the stock price index, (2) interest rates are the Granger cause of the stock price index, and the stock price index is not the Granger cause of interest rates, (3) the stock price index cannot adjust to the interest rate in a short time.
| Published in | International Journal of Economics, Finance and Management Sciences (Volume 11, Issue 1) |
| DOI | 10.11648/j.ijefm.20231101.12 |
| Page(s) | 14-20 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2024. Published by Science Publishing Group |
Interest Rate, Stock Marke, Stock Price Index
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APA Style
Haodong Chen, Ruiqi Sun, Ke Gao. (2023). The Effect of Interest Rate Adjustment on the Stock Price Index in China. International Journal of Economics, Finance and Management Sciences, 11(1), 14-20. https://doi.org/10.11648/j.ijefm.20231101.12
ACS Style
Haodong Chen; Ruiqi Sun; Ke Gao. The Effect of Interest Rate Adjustment on the Stock Price Index in China. Int. J. Econ. Finance Manag. Sci. 2023, 11(1), 14-20. doi: 10.11648/j.ijefm.20231101.12
AMA Style
Haodong Chen, Ruiqi Sun, Ke Gao. The Effect of Interest Rate Adjustment on the Stock Price Index in China. Int J Econ Finance Manag Sci. 2023;11(1):14-20. doi: 10.11648/j.ijefm.20231101.12
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Download@article{10.11648/j.ijefm.20231101.12,
author = {Haodong Chen and Ruiqi Sun and Ke Gao},
title = {The Effect of Interest Rate Adjustment on the Stock Price Index in China},
journal = {International Journal of Economics, Finance and Management Sciences},
volume = {11},
number = {1},
pages = {14-20},
doi = {10.11648/j.ijefm.20231101.12},
url = {https://doi.org/10.11648/j.ijefm.20231101.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20231101.12},
abstract = {The interest rate is one of the main tools used to control monetary policy in China. Changes in interest rates will affect the return on capital and the financial situation of enterprises, which will in turn have an impact on the stock market. What effect will interest rate adjustments have on the stock market? Are fluctuations in the interest rates and the stock market correlated? At present, there is no consensus on the answers to these questions. This paper studies these problems. In order to study the effect of the interest rate adjustment on the stock price index, this paper first conducts literature review and analysis, and then uses unit root test, Johansen integration test, Granger causality test and error correction model. The factors studied are the one-year deposit rate and the closing price of the Shanghai Composite Index from 1991 to 2015. It can be seen that the long-term relationship between the interest rate and stock prices is a reverse relation - when interest rates change, the stock price is adjusted in reverse. Specifically, (1) there is a long term reverse relationship between the interest rate and the stock price index, (2) interest rates are the Granger cause of the stock price index, and the stock price index is not the Granger cause of interest rates, (3) the stock price index cannot adjust to the interest rate in a short time.},
year = {2023}
}
TY - JOUR T1 - The Effect of Interest Rate Adjustment on the Stock Price Index in China AU - Haodong Chen AU - Ruiqi Sun AU - Ke Gao Y1 - 2023/01/10 PY - 2023 N1 - https://doi.org/10.11648/j.ijefm.20231101.12 DO - 10.11648/j.ijefm.20231101.12 T2 - International Journal of Economics, Finance and Management Sciences JF - International Journal of Economics, Finance and Management Sciences JO - International Journal of Economics, Finance and Management Sciences SP - 14 EP - 20 PB - Science Publishing Group SN - 2326-9561 UR - https://doi.org/10.11648/j.ijefm.20231101.12 AB - The interest rate is one of the main tools used to control monetary policy in China. Changes in interest rates will affect the return on capital and the financial situation of enterprises, which will in turn have an impact on the stock market. What effect will interest rate adjustments have on the stock market? Are fluctuations in the interest rates and the stock market correlated? At present, there is no consensus on the answers to these questions. This paper studies these problems. In order to study the effect of the interest rate adjustment on the stock price index, this paper first conducts literature review and analysis, and then uses unit root test, Johansen integration test, Granger causality test and error correction model. The factors studied are the one-year deposit rate and the closing price of the Shanghai Composite Index from 1991 to 2015. It can be seen that the long-term relationship between the interest rate and stock prices is a reverse relation - when interest rates change, the stock price is adjusted in reverse. Specifically, (1) there is a long term reverse relationship between the interest rate and the stock price index, (2) interest rates are the Granger cause of the stock price index, and the stock price index is not the Granger cause of interest rates, (3) the stock price index cannot adjust to the interest rate in a short time. VL - 11 IS - 1 ER -
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