Study On Conductivity Of RMB Exchange Rate Fluctuation To Fluctuation Of Chinese Stock Market Industry Groups

With the advancing process of China's opening up, the fluctuations of China's import-export trade volume and foreign exchange reserves are huge. RMB exchange rate acts sharp shocks. Meanwhile, opening up of China's financial market is gradually opening, financial markets especially capital market in reform continues to face many uncertainties in the outside world. These increase risks in the market. Since July 21 in 2005, single exchange rate system to peg greenback was over in China, it change based on market supply and demand, reference to a basket of currencies, as managed floating exchange rate system. The dollar-Yuan exchange rate adjusts from8.28 to 8.11. The upvaluation of Renminbi has become a reality, and RMB exchange rate acts sharp shocks at now, this is worthy to consider and discuss for the influence in the development of China's capital market. Development trend of the stock market reflects the degree of development of the capital market. As a country's economic "barometer", it reflects the different level of development of the real economy.According to the purchasing power parity theory, exchange rates of RMB can be seen as the comparison for purchasing power of different currencies of China and other countries. Movement of exchange rate will transfer to the changes in the purchasing power of money, which impact on the real economy, and reflect through the stock market.This paper combines qualitative analysis with empirical analysis in research methods. It regards qualitative analysis as the theories support point and empirical analysis as the bearing, to explore the conduction of RMB exchange rate fluctuation on the industry groups of stock market after foreign exchange reform in 2005. On qualitative analysis, Combined with theory of exchange rate determination and stock price related theory. Theory of exchange rate determination includes theory of purchasing power parity and asset markets, stock price related theory includes behavioral finance theory and the efficient market theory, then analyzing the conductivity of exchange rate fluctuation to stock market fluctuation. On empiricalanalysis, selecting respectively data of the dollar-Yuan exchange rate and China's a-share market sectors index price from the July 21 in 2005 to the end of 2015.Determining the number of industry groups by wind information financial terminal,according to Shen Wan level industry categories, it is a total of 28 industry groups.The correlation processing of datas will finish by software of EViews7.0. Exploring the conduction of RMB exchange rate fluctuation on the fluctuation of Chinese stock market industry groups by unit root tests, cointegration, granger causality test,impulse response and variance decomposition method. By this paper, providing a correct understanding to this for investors and enterprise, so as to make many more rational decisions of investment and financing.