Exchange Rates And Stock Pricess Interactions: An Empirical Studies About Mainland China, Taiwan And Hongkong After 2005 Exchange Rate Reform

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. The change in exchange rate can influence the stock price more than before , vice versa.At the same time, Mainland,Taiwan and Hongkong have different systems on economic and politics,what's more, as the growing voice of the reunification of the motherland ,it's essencial to study the relationship between Mainland's,Taiwan's and Hongkong's.According to different levels of area development,the world market is divided into two parts—the developed market and developing market.By the method,we can distinguish the efficiency of information transmission in two different markets.Chapter two elaborated the relative theories about the connection between exchange rate and stock price,and pointed out the main four transduction pathways.Chapter three reviewed the actual relations between exchange rate and stock price in Mainland,Taiwan and Hongkong. Chapter four using the cointegration and Granger test , discussing the relationship between exchange rates and stock prices in Mainland China,Taiwan and Hongkong after exchange rates reform in China.The empirical results show that there exist a long-run cointegration and short-run interactions between exchange rates and stock prices in Mainland China. And only short-run interrelatonship in Taiwan.The data of Hongkong indicates them have a unidirectional Granger causality,but stock prices'change impact exchange rates'change by Variance decomposition.Chapter five is on the basis of above analysis,listting some proposals for rational development of exchange rate and stock market and some conclusions and policy suggestions for the reform of Mainland's,Taiwan's and Hongkong's foreign exchange management, the building of share markets and exchange markets are put forward.