Study on the impact of stock supply and demand on stock composite index

Abstract

Based on the stock supply and demand factors, this paper takes the Shanghai a-share as an example, analyzing the supply and demand factors which affect the composite index of Shanghai Stock Exchange with VAR model. The results show that, there is a long-term positive effect of the money supply changes on the Shanghai a-share composite index, while the disturbance of the total market value has a long-term of negative effect. Therefore, to maintain stability in the stock market, on the one hand, the IPO audit standard should be strict, blind issued or expansion of high p/e ratio and high city net rate stocks should be avoided; On the other hand, appropriate monetary supply should be provided to promote increasing of mobility, and it provides a policy direction to the reform of stock market for China in current.