Research on the Relationship between the Stock Price's Fluctuation And the Interest Rate's Adjustment in China

Since 2006, the Central Bank of China has adjusted the interest rate for many times. As one of the most Important measures adjusting macro-economy, the change of the interest rate must have effects on the stock market. In this paper we used the Shanghai stock index as an empirical example to research the effect that the interest rate's change had on the stock price's fluctuation. We got the conclusions as follows: The fluctuation series of the stock price can be fitted well by a AR-ARCH(5) model which Included the dummy variables indicating the rate's change; On the condition of keeping the extent of the rate's change invariant, the adjustment of the interest rate has an stable marginal effect on the fluctuation of the stock price.