The Interaction between Interest Rates and Stock Returns:A Comparison between China and US
(2015) NEKN02 20151Department of Economics
- Abstract
- The relationship between monetary policy and stock market has been discussed since 1970s, but it is still one of the hot topics due to the changing market condition over time among different countries and the development of empirical methodologies. Owing to the fact that the stock market of China has involved in the fast-growing of Chinese economy, identifying the relationship between interest rates and stock returns in China becomes more attractive. This paper estimates the interaction between interest rates and stock returns in China by employing the structural vector autoregressive (SVAR) models with a long-run restriction, and the interaction in US is analyzed as a comparison. By analyzing the impulse responses and variance... (More)
- The relationship between monetary policy and stock market has been discussed since 1970s, but it is still one of the hot topics due to the changing market condition over time among different countries and the development of empirical methodologies. Owing to the fact that the stock market of China has involved in the fast-growing of Chinese economy, identifying the relationship between interest rates and stock returns in China becomes more attractive. This paper estimates the interaction between interest rates and stock returns in China by employing the structural vector autoregressive (SVAR) models with a long-run restriction, and the interaction in US is analyzed as a comparison. By analyzing the impulse responses and variance decompositions which are generated from the SVAR models, we confirm the interaction between interest rates and stock returns in China. However, compared to that in US, the magnitude of interaction in China is much smaller, showing that the effectiveness of interest rates as a monetary policy tool is still low. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/5472827
- author
- Chen, Haian LU and Hu, Di LU
- supervisor
- organization
- course
- NEKN02 20151
- year
- 2015
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- interest rates, stock returns, structural VAR models
- language
- English
- id
- 5472827
- date added to LUP
- 2015-06-29 13:22:55
- date last changed
- 2015-06-29 13:22:55
@misc{5472827, abstract = {{The relationship between monetary policy and stock market has been discussed since 1970s, but it is still one of the hot topics due to the changing market condition over time among different countries and the development of empirical methodologies. Owing to the fact that the stock market of China has involved in the fast-growing of Chinese economy, identifying the relationship between interest rates and stock returns in China becomes more attractive. This paper estimates the interaction between interest rates and stock returns in China by employing the structural vector autoregressive (SVAR) models with a long-run restriction, and the interaction in US is analyzed as a comparison. By analyzing the impulse responses and variance decompositions which are generated from the SVAR models, we confirm the interaction between interest rates and stock returns in China. However, compared to that in US, the magnitude of interaction in China is much smaller, showing that the effectiveness of interest rates as a monetary policy tool is still low.}}, author = {{Chen, Haian and Hu, Di}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Interaction between Interest Rates and Stock Returns:A Comparison between China and US}}, year = {{2015}}, }