| On July 21th,2005, China carried out the reform of the formation mechanism of the RMB exchange rate, and the RMB stopped pegging to the U.S. dollar, so that the formation mechanism of the RMB became more flexible. After the exchange rate reform, the RMB kept on appreciating, and it has appreciated about 30% now than it was a decade ago. On the other hand, Chinese stock market was still filled with high risks during this decade. In this market, the rise of the stock price would be very quick in the bull market, while the stock price slumped in the bear market. So it is a stock market accompanied with wild fluctuation, where the investors expose themselves to the high risk. So, is there any relationship between the change of the exchange rate of the RMB and the risk in Chinese stock market? What is the impact caused by the change of the exchange rate of the RMB on the risk of the stock market? This paper will discuss these questions.To explore the above questions, this paper will study the impact of the change of the exchange rate of the RMB on the risks of different industries in Chinese stock market. Before the theoretical analysis, the author of this paper has referred to many literatures and sorted them, then came up with 3 hypotheses based on the theories:(1) The shock of the RMB exchange rate can cause different effects on the risks of different industries in Chinese stock market; (2) the change of the exchange rate of the RMB will has unsymmetrical effects on the risks of different industries in Chinese stock market; (3) the change of the exchange rate of the RMB has lagged effects on the risks of different industries in Chinese stock market. In the empirical research, this paper selected the daily closing prices of the following indexes, including Shanghai and Shenzhen 300 index, the real estate industry index, textile and costume industry index, petroleum industry index, automobile industry index, aviation industry index and gold industry index in Chinese stock market as well as the daily closing price of the central parity rate of the RMB against the U.S. dollar in indirect quotation. We used the daily data from January 4th,2010 to June 30th,2015, and selected 1326 trading days when both the Chinese stock market and the foreigner exchange market were working. Then we got the logarithm yield of each index and we used them to set up the GARCH model, which could help us to get the daily value at risk of each index so that we could describe the risks that Shanghai and Shenzhen 300 index and each industry were facing. After we got the sequence of VaR of each industry, we then started the following empirical researches by using the VaR sequences we got above. (1) Drew the graphs of impulse response function, so that we could study whether the shock of the RMB exchange rate would cause different effects of risks on various industries in Chinese stock market.(2)Set up EGARCH(1,1)model by using the VaR sequences of various industries to study the unsymmetrical fluctuation of the VaR sequences of various industries. We also put the appreciation variable of RMB and the depreciation variable of the RMB into the GARCH (1,1) model, and used the Wald test, so that we could find out whether the appreciation and the depreciation of the RMB would have asymmetric effects on the risks of different industries in Chinese stock market; (3) Set up a GARCH (1,1) model which included the VaR sequences of various industries, the VaR sequence of Shanghai and Shenzhen 300 index as well as the lagged variables of the logarithm yield of the exchange rate of the RMB so that we could research whether the change of the exchange rate of the RMB has lagged effects on the risks of different industries in Chinese stock market.After we finished the researches that were mentioned above, we drew a conclusion as follows:(1) In Chinese stock market, the effects that the risks of various industries got from the shock of the RMB exchange rate would be digested in a short time. To different industries, the effects of the shock were different. (2) In Chinese stock market, the fluctuations of the risks of aviation industry, petroleum industry, gold industry and textile and costume industry were unsymmetrical, and the fluctuations of the risks of the real estate industry and automobile industry were symmetrical. Besides, the change of the exchange rate of the RMB had asymmetric effects on the risks of gold industry, aviation industry and textile and costume industry. However, to the real estate industry, petroleum industry and automobile industry, the change of the exchange rate of the RMB had symmetrical effects on the risks of these industries. (3) The change of the exchange rate of the RMB had lagged effects on the risks of various industries in Chinese stock market and the risks of various industries have different reaction duration to the change of the exchange rate of the RMB. What’s more, we also found out that the change of the exchange rate of the RMB had large lagged effects on the risks of various industries. Maybe, the reason why to different industries, the effects were different, is that, every industry has its own character, and to different industries, the relationship between its profit and the exchange rate of the RMB may be different, so the effects may be different; to different industries, the appreciation and the depreciation of the RMB maybe have different significances, for example, it is a good news for the real estate industry when the RMB appreciates, while it becomes a bad news when the RMB depreciates. So the appreciation and the depreciation of the RMB can cause different effects on the risk of this industry and that may cause unsymmetrical effects; Also, it will take time before the change of the exchange rate of the RMB can affect the stock market and it may cause the change of the exchange rate of the RMB has lagged effects on the risks of various industries in Chinese stock market.Finally, we summarized every conclusion and put forward the policy suggestions. To the investors, we thought they should regard the exchange rate of the RMB as an important factor because it can affect the risks of various industries in Chinese stock market. To the policy makers, they should try to keep the stabilization of the exchange rate of the RMB when they are making economic policies so that it can decrease the great fluctuation and risk that caused by the large shifts of the exchange rate of the RMB in Chinese stock market. Besides, to the researchers, they can research the effects that caused by the change of the exchange rate of the RMB on the risk of the stock market in new ways, for example, they can use another country’s data to research such subject, and discuss the differences and similarities between China and foreign countries. |
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