An Empirical Study On The Dynamic Relationship Between RMB Exchange Rate And Stock Price

Along with the growing opening degree of the global economy integration,the integrating process of international financing markets is deepening , and the co-integration of the exchange rate and price of stock market,as the two main sub-markets of the international financing market, is stronger than before. In 2005, the reformation of RMB exchange rate system and the dividing of the equity in China, as landmark cases,have been making the RMB exchange rate's floating range is further widened and the shares in the different share holders are traded freely. The two reforms significantly improve the connection between the foreign exchange market and the stock market in china.In this context, this paper has made for further study on this linkage between the exchange rate and stock price. The article is divided into five chapters. First, this paper summarized the literature about this relationship, elaborated the relative theories about the connection between exchange rate and stock price, pointing out the main five transduction pathways. Then it designed the model to analysis this linkage between exchange rates and stock price. This article focused on the empirical part. This apart made an empirical research on the dynamic relationship between the foreign exchange rate and the stock price using selecting on July 22nd, 2005 to December 31, 2008 as sample period. Firstly we carried on the analysis to the exchange rate and the stock price ratio sequence using unit root test, co-integration test and Granger test. Then we established EC-EGARCH model considering the erroneous correction term, made the empirical analysis again and drew some conclusions.After the above analysis, this article carried on the summary to this article, and proposed some reasonable policy suggestions which consummates our foreign exchange and the stock market constructs.