Complex Relationship Between Stock Price and Macro-Economy Based on Structural Equation Model

Zaiqiang HUO, Jinnan YIN


Studying China’s stock market from a macroeconomic perspective has very important theoretical and practical significance. In the theoretical level, it can deepen our understanding of the field; but it can improve the investment combination of performance and increase our investment optional time reliability in the real level. This paper strikes up influence path diagram based on using the existing empirical research conclusion, and gets its path coefficient and the causal path diagram using the ML, ADF and GLS method. After the statistical significance test, we think the casual relationships of China’s stock market as followed can be accepted: firstly, the year-on-year increase of M1 will cause the rise of Shanghai index; secondly, the year-on-year increase of PPI will cause the decrease of Shanghai index; thirdly, the year-on-year increase of M2 will cause the decrease of Shanghai index; finally, the appreciation of the RMB will cause the increase of Shanghai index at last.


Complex Relationship; China’s stock price; Macroeconomic variable; Structural equation model

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