Abstract: For both regulators and investors, it’s very important to understand the effects of policy on China’s stock market. The accumulated abnormal return effects of good news policy and bad news policy on Shanghai Composite Index are studied by the method of event study. Some results of these effects are concluded and the causes of them are also put forward. It concludes that China’s stock market will move smoothly again after three-to-four-day-adjustment to the short-term impacts of policy. Using the method of event study to study the changing patterns in market indexes is another creative contribution of this paper.