Study on Relativity between China’s Nominal GDP and the Shanghai Securities Composite Index

Dahong Guan

doi:10.4236/jssm.2018.115036

Abstract

By implementing X-11 process to eliminate the seasonal effect from the data of nominal GDP and Shanghai Securities Composite Index from 1996 to 2015, conducting co-integration test and Granger causality test on these processed data, and examining the leading characteristics of the securities index with the Lag regression model, the present thesis finally conducts a detailed analysis of the research results and puts forward some policy recommendations. The study suggests that there is a stable positive-correlating long-term relationship between Shanghai securities composite index and nominal GDP, the former being the Grainger causes for the latter, which mainly arises from the improvement in the institution of the stock market and the larger ratio of the stock market capitalization to that of nominal GDP. In addition, the increasing liquidity of long-term stock market and investors’ speculation to the stock market based on the national macro-control policies also elucidated the inherent property of Shanghai Composite Index as a leading indicator of Chinese Nominal GDP in the results presented.

Highlights

By implementing X-11 process to eliminate the seasonal effect from the data of nominal GDP and Shanghai Securities Composite Index from 1996 to 2015, conducting co-integration test and Granger causality test on these processed data, and examining the leading characteristics of the securities index with the Lag regression model, the present thesis conducts a detailed analysis of the research results and puts forward some policy recommendations
The present paper employs a X-11 process to eliminate the seasonal effect from the data of nominal GDP and Shanghai securities composite index from the first season of 1996 to that of 2015, conducts a Co-integration test and Granger causality test on these processed data, and analyzes the leading characteristic of the securities index with the Lagged regression model [5], a detailed analysis of the research results and some policy recommendations are provided
The dynamic regression equation shows that in the long term, if Shanghai Securities Composite Index rises 1%, the nominal GDP will follow by a 1.2% rise, suggesting that the rise in stock index would lead to greater growth in macro economy, and meaning that the Shanghai Securities Composite Index has an augmented effect on nominal GDP

Summary

Introduction

Since the establishment of the securities trading center in 1991 and the gradual development of Chinese financial market, the gross value of the stock market has been accounted for a higher proportion in China’s nominal GDP and the devel-. In the milieu of the gradual opening-up of Chinese financial market, the interest rate liberalization and the internationalization of RMB, the study on the relations between stock market and nominal GDP becomes more important. Nowadays the securities market in China has reached a certain scale after 20 years’ development, there is still faultiness in the development of legal system, regulatory system, and market guidance system. There must exist certain relationship between macroeconomic and securities markets in China

Objectives

Methods

Findings

Conclusion