Study On Interactive Relationship Between Stock Market And Exchange Market Of The BRICS Countries

The BRIC countries, including C hina, India, Russia, Brazil and South Africa. As representatives of emerging economies, the rapid growth of their economy has attracted the attention of the whole world. As representatives of one country’s financial markets, people look highly of the interactive relationship between stock market and foreign exchange market. Compared with the developed countries, due to historical problem and many other reaso ns, there exist some defects in the stock market and foreign exchange of the BRIC countries, such as low degree of information disclosure, high-risk, volatility and other shortcomings. Therefore, it is necessary and significant to use modern scientific methods to analysis the linkages between the stock market and foreign exchange market of the BRICS countries, discover the comprehensive intrinsic relationship between the stock market and foreign exchange, reveal the objective laws of interaction further enrich diversified financial marketing perspective in the country level. With the development of the economic power and status of the BRIC countries today, there exist high research value and significance.Based on the status and characteristics of financial market, this paper investigated the mean spillovers and volatility spillover between stock market and foreign exchange market of the BRICS countries, with the method of VAR model and GARCH-BEKK model, combined with co- integration test, Wald test techniques, exc,which reveals the basic law and the characteristics of the interaction between the two markets. The results showed that within the selected sample interval, there are different results in five countries in terms of the mean and volatility spillovers: Except China, there exist significant bidirectional mean spillovers in the other four countries; as for volatility spillover, China, Russia, there was a significant bidirectional volatility spillover, Brazil and South Africa are present in the opposite direction-way volatility spillover, only India does not exist volatility spillovers.Overall, in terms of the between the ideal interaction of the two markets, the empirical results show that India, Brazilare relatively good but C hina, Russia is relatively poor. The results means the BRIC countries need to focus on structural problems not only its own economic development, improve financial market regulation, to maintain market stability and independence, reduce spillover effects, but also to strengthen financial cooperation between countries to finance market to better serve the real economy.