A Multiresolution Wavelet Based Analysis of the Chinese Stock Market

This paper investigates the domestic impacts on the Chinese stock market using multiresolution wavelet. Three domestic impact factors are considered, which are inflation rate, M2 and lending rate, while Shanghai stock exchange composite index (SSECI) is selected to be representative of the Chinese stock market due to its significance. By decomposing the time series into four level cycles with different scales, the results reveal that among the three domestic factors, M2 has the strongest impact on SSECI at all scales, followed by inflation rate, while lending rate contributes almost no influence to the Shanghai stock exchange except at the largest scale of 16-32 month cycles.