A Comparative Study On The Correlation Between China, The United States, Japan Stock Market And Foreign Exchange Fluctuation

With the increasing acceleration of economic globalization, the competition between the countries is increasingly reflected in the comparison of the monetary capital strength, and thus making the smooth development of financial markets more and more critical. In particular, the two major financial submarkets--the stock market and the foreign exchange market, have become increasingly prominently important to a country’s economy development. Stock index and exchange rate as the two major financial market price of the stock and foreign exchange markets, while also reflecting the healthy operation of the real economy of a country, and thus the intrinsic correlation effects between these them attract intensive attention of both the domestic and foreign scholars and the governments. Especially after the outbreak of the international financial crisis, to avoid excessive volatility in the domestic real economy and financial markets and to ensure the smooth development, become the primary task of the national authorities. To quantify the risk transfer effect between domestic financial markets also become increasingly important.Based on the BVGARCH-BEKK model, this paper analyzed the conduction mechanism of spillover effects between the domestic stock market and exchange market of China, America and Japan before and after the global financial crisis, revealing the characteristics of financial markets and the financial crisis’s effects on them. The focus of this paper is to analyze China’s financial market risk conduction characteristics at the current stage of China and the new features of them after the financial crisis. And the SSE commercial,real-estate,industry,public and composite indexes are used as the and representatives of the domestic stock market to conduct a more comprehensive comparison of the different industries’ stock index and exchange rate relationships change differences under the impact of the financial crisis. At the same time, the United States as the country of origin of the global financial crisis, and Japan as a country with mature and well-developed financial market, are compared with China in this paper to help clear our future direction to develop the financial markets and to make improvement of our financial-crisis responsing ability. Empirical results showed:1. United States:Before the outbreak of the financial crisis, the disturbance in the stock market was transfered to the foreign exchange market and foreign exchange market disturbances couldn’t return, and the volatility of the stock market and foreign exchange market was transfered to each other. After the crisis, the disturbance in the stock market could no longer be transfered to the foreign exchange market but foreign exchange market disturbances could be transferred to the stock market. Therefore the occurrence of the global financial crisis enhanced the volatility spillovers from the foreign exchange market to the stock market and weakened the volatility spillovers from the stock market to the foreign exchange market.2. Japan:Before the outbreak of the financial crisis, the disturbance of the stock market and foreign exchange market was transfered to each other, and the volatility of the stock market was transfered to the foreign exchange market and foreign exchange market disturbances couldn’t return. After the crisis, the disturbance and the volatility of the stock market and foreign exchange market could be transfered to each other. This shows that the occurrence of the global financial crisis also enhanced the volatility spillovers from the foreign exchange market to the stock market in Japan, and the risk of the transference of Japan’s domestic financial markets significantly increased after the crisis.3. China:After the financial crisis, the volatility of the domestic foreign exchange risk infected significantly to the stock market, and stock-market fluctuations did not generate significant impact to the exchange market. Overall, the spillover effects between the foreign exchange and stock markets are non-symmetric. By further looking at the relationship between plate index and exchange markets, it was found that the business and industry indexes are affected most, and their volatility foreign spillover effects with the exchange market were remarkbaly reduced.Finally, this paper further analyzed the empirical results and revealed the internal mechanism of the domestic financial markets’risk transfering of each of the three countries-China, America and Japan. With China’s current national conditions, it is of most important theoretical and practical meanings for company operators to hedge risks timely, for domestic investors to explore investment opportunities and control portfolio risk, and for financial regulators to strenthened the ability to guard against financial risks and to face the financial crisis.