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China’s stock market established for nearly two decades, has experienced ups and downs and twists and turns, has made significant achievements, now has become the world’s fourth largest stock market. The stock market development and financing of state-owned enterprise reform provided a strong support in promoting the improvement of China’s financial market structure, but also awakened the Chinese people’s investments. Stock market has risks, the Chinese Market breadth of the great risk, particularly elusive. China’s retail investors to a large well known, pension, pensions, and even tuition are put to this regeneration of the market bubble which, for the prediction and control risk needs of particular urgency. Stock price index is a measure of stock market movements in the overall price level and its scale, but also reflects a country’s or region’s economic development in the state of sensitive signals, its change is also a reflection of market risk. The Shanghai Stock Aggregate Index is the most commonly used in China stock market a stock price index, the development trend of China’s Shanghai Stock Aggregate Index special reason behind that? Special factors which have an impact on China’s Shanghai Stock Aggregate Index and thus will have investment risk?Papers on the relevant research literature was reviewed, using normative analysis to explore the relationship between the Shanghai Stock Aggregate Index and the investment risk, combing the factors affecting its change. And then select the January 2005 to November 2009 the latest data on the basis of the statistical analysis, summed up the status quo of China’s Shanghai Stock Aggregate Index on the Shanghai Stock Aggregate Index factors that affect our empirical research. In this paper, use statistical analysis methods such as factor analysis to empirical testing, empirical results show that:Since 2005, the first most important factors affecting of the Shanghai Stock Aggregate Index is the money supply, as China’s rapid economic growth, social progress, a substantial increase in personal income, bank savings, preserving and increasing the value of the property is no longer the only means that people can have more investment instruments such as stocks, bonds, funds, capital adequacy will be driven by stock-market boom. In addition, the influx of hot money has also accelerated the warming of the stock market; Second, related markets (domestic real estate market, the financial interest rate markets as well as foreign securities) and prices factor, which in recent years, exchange rate reform, stock change, financial crisis are closely related to the larger environment, especially in the economic globalization today, China’s stock domestic and international market development and the linkage of the relevant market is growing; The third factor is economic development (macroeconomic developments, the stock market development, the development of listed companies, etc.), economic growth has accelerated, corporate profits increased, people’s income increase will inevitably lead to increased investment and consumption demand; Last is the herd mentality factor, investors often chase sell into herd behavior, thereby contributing to the rise and fall stock. Finally, in the former text of theoretical analysis and empirical tests, based on risk-averse individual investors and government regulation to make reasonable suggestions. Investors should cultivate and improve the quality of their own and establish a sound investment philosophy, at the same time concerned about the statements of listed companies, but also concerned about the factors affecting stock, and strengthen awareness of investment risks and enhance investment returns; addition, the Government should also strengthen market supervision, develop of hedging instruments, actively to promote the process of internationalization of China’s stock market to provide investors with excellent investment environment.
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