Research on the Relationship between Interest Rate and Stock Price in China

Now China's economy is developing very quickly. China's capital market is on the way to mature. More and more people are interested in the relationship between interest rates and stock market research. Most people think that the stock price will be affected by inflation, interest rates, policies, macroeconomic environment and other factors, particularly affected by interest rate factors. We now have a lot of scholars are studying whether banks adjust interest rates to influence the stock market. This paper will list a theoretical framework describing the relationship between interest rates and stock markets, focusing on the impact of interest rate policy changes on the stock market price. This paper studies the relationship between interest rate and stock market price, not only helps investors to have more reference information in the stock market, but also provides reference value for the central bank to make monetary policy. This paper analyzes the relationship between interest rates and stock prices in the basis of previous studies by using the sample of 2003 to 2014 data in China. We will study the relationship between interest rates and stock indices from empirical research and analysis of short term and long term point of view. This paper will be written according to the theory of knowledge. First, this paper will give a brief introduction about interest rates and equity markets, including how the stock price and interest rates is determined and so on. Then, it will do an empirical research about interest rates and stock prices. The empirical research is mainly used in time-series analysis. Finally, we will sum up the situations and give different advice to different stakeholders.