Study Of The Relationship Between China’s Stock Market And Exchange Market Based On Empirical Model Decomposition

With the accelerating process of economic globalization and the rising popularity of information and communication technologies, the connection between financial markets is becoming more and more close. From 2005 to 2007, the market of Chinese stock has experienced the largest stock market bull run, as the crash of stock market in 2007, the financial market and real economy had immense downward momentum. With the speeding process of the stated owned enterprises reform, the market of Chinese stock has started a new round of the bull tendency. How to avoid the tragedy in 2007 makes again, which makes that the research of the relationship between stock market and exchange market has important significance.This thesis analyses the short-term, mid-term and long-term relationship between stock market and exchange market using Granger causality test, co-integration analysis and error correction model. The empirical results show: In the short term, the stock market and exchange market appears weak negative correlation relationship, which means the rising stock prices along with the appreciation of the RMB, the stock market is not Granger cause to exchange market, and exchange market is not Granger cause to stock market. In the mid term, the stock market and exchange market appears weak positive correlation relationship, which means the rising stock prices along with the depreciation of the RMB, the stock market is Granger cause to exchange market, and exchange market is Granger cause to stock market. In the long term, the correlation between stock market and exchange market is stronger than in the short and mid term, and it presents positive correlation, the stock market is not Granger cause to exchange market, and exchange market is Granger cause to stock market. Finally, this thesis puts forward the corresponding policy recommendations according to the conclusion studied.