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Empirical Analyses On The RMB Exchange Rate And Stock Price

Posted on:2012-06-26Degree:MasterType:Thesis
Country:ChinaCandidate:L MaFull Text:PDF
GTID:2189330335475484Subject:Finance
Abstract/Summary:PDF Full Text Request
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 their determining factors. Similarly, the relationship between price volatility of foreign exchange market and stock market also gradually emerged. Exchange rate and stock price, as two major financial-market prices, are not only indicators of national economic strength, but also references of microcosmic decision-making. So the research on the relationship between exchange rate and stock price has important significance.According to the logical clue of theory-empirical, the article deducts the models of relationship between variation of currency exchange rate and that of stock price in virtue of the theories of exchange rate determination and stock pricing theory analysis. Next, it analyzes mutual transmission mechanisms of co-movement between exchange rate and stock price by employing the method of combining macroscopic and microcosmic perspectives, and it found that the transmission mechanisms are asymmetric. the transmission between can be found by interest rate, international trade, capital flows, heart, such intermediary way expectations affect each other. In the case of the reform of the RMB exchange rate regime on July 21,2005, it investigates empirically the short-run and long-run dynamic relationships between the RMB exchange rate and stock price in a vector error correction model (ECM) by using time series analysis.Based on theoretical and empirical analysis, this paper draws the following conclusions:In an open economy, a positive correlation, which need to be achieved through a number of intermediaries, exists between exchange rate (direct quotation) and stock price, and it is influenced or changed by the maturity and opening extent of financial. Finally, in light of this conclusion as well as the present situation of China, this proposes some policy suggestions for promoting the development and coordination of China's foreign exchange market and stock market and constructing a benign interaction between exchange rate and stock price.
Keywords/Search Tags:RMB exchange rate, stock price, transmission mechanism, Error Correction Model
PDF Full Text Request
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