Research On The Relationship Between RMB Exchange Rate And Stock Prices

Along with our country foreign exchange system reform deepening, the foreign exchange market frame preliminary formation, and the exchange rate on the influence of national economic become more and more evident, and also to the financial tool price. The investors'attention to the exchange rate undulation is enhancing day by day. At the same time, the stock market, as a part of the capital markets, has many functions such as financing, optimizing resources disposition and acting the important role in the economy. The stock price is a direct performance of a country economical trend. Its changes can be intuitive response to the economic development of economy, money supply and demand, market conditions, industry prospects and political situation changes. Therefore research on the relationship between stock price and exchange rate has realistic significance, especially in the current economic situation,pressure of the RMB rising is growing, and frequently fluctuation of stock market. Therefore, study on relationship between exchange rate fluctuations and stock price changes can cause people to pay more attention to prevent the risk of foreign exchange and the stock market.Based on the theory of exchange rate and stock price theory, this paper uses normative analysis and empirical analysis method to research the relationship between exchange rate and stock price. First, states the relevant theories and research results of scholars analysis the basic theory of stock prices and foreign exchange rate; Second, through some factors such as the money supply, interest rates, psychological expected, we analyzed the process of affection between the two factors, and discovered that in the short-term there exists negative correlation between them, but positive in the long-term; At last, using Eviews6.0 to do empirical study on four variables: RMB to US dollar middle rate, the shanghai composite index, the Shenzhen composite index and shanghai Shenzhen 300(Time span is from Mar.2008 to Dec.2010). Through the research methods: unit root test, cointegration test, granger causality test, vector auto-regressive model, impulse response analysis and variance decomposition analysis, finally we got the same conclusion with the theoretical analysis, then put forward the policy ideas according to the empirical research results.