The Empirical Analysis On The Relationship Between Exchange Rate And Stock Price

With the development of economic globalization and the improvement of financial deepening, the relationships among different financial markets become more and more closely. Thus the market prices also become more vulnerable to other market volatility, in addition to influencing by their determining factors. Among them, especially take the foreign exchange market and Stock market's relatedness as really. In recent years, because of foreign exchange market's fluctuation caused the case which the stock market lowered largely to be everywhere. Therefore, the research on the relationship between exchange rate and stock price has important significance.This paper has utilized economic theories such like finance theory, macroeconomics, econometrics, used research technique which the theoretical analysis and the empirical analysis unify. First of all, in foundation of introduction the exchange rate and the stock price, the paper analyzes the conduction mechanism from real and financial part, and thinks that in a short time the financial function is obvious, but returns from the long-term consideration to the real function. Through analyzes its conduction mechanism, the paper proposes the viewpoint:the exchange rate and the stock price relations should consider by stages generally that each stage its conducting direction, positive and negative is all different. This viewpoint has the innovation theoretically. Secondly, the paper uses the case analysis. It selects China and Japan separately for the emerging market country and developed country representative, analyzes their exchange rate form, collects place which of the similarities and differences compared with it changes. This provides the reality basis for the preceding viewpoint. Thirdly, proposing the viewpoint by empirical analysis. The paper selects Chinese and Japanese daily data to examine its stability, co-integration and causality. Through the empirical analysis, we get the result that the only exchange rate granger cause the stock price in China while both the exchange rate and the stock price granger each other in Japan. This result proves the viewpoint above accuracy. Fourthly, on the base of this result, the paper takes a further consideration, analyzes the RMB rate change the advantages relations which brings regarding the different industry. Finally, aims at our country exchange rate and the stock price development as well as industrial development, the paper gives the different policy suggestion.Through theoretical and empirical analysis, the paper draws the following conclusion:because its country locates the economic environment to be different, the relationship between exchange rate and stock price presents the stepped regular pattern. Specifically speaking, in the first stage, a positive one-way correlation exists between exchange rate and stock price. The relationship in this stage exists mainly in emerging market country which trade balance is the major conduction intermediary. In the second stage, the correlation is negative. Although exchange rate is under control, the capital has already entered the market.In the third stage, a negative one-way (even two-way) correlation exists between exchange rate and stock price. The relationship is suitable the developed country generally which characteristic is that money market developed and capital flow freely.