An Empirical Study on the Relationship between Stock Market Returns and Macroeconomic Variables: The Evidence from China
This study will investigate whether current economic activities in china have explanatory power over stock returns, or not. Monthly data of Shanghai Securities Exchange Composite Index and a set of macroeconomic variables, including money supply (M2), Value-added of industry (VAI), are used in this study. Engel-Granger, Johansen-Juselius co-integration tests and Granger Causality test are used to explain the long-run relations between macroeconomic variables and stock index.