| In the era of global economy integration,the economic development of each country is like a destiny community.China acting as a representative of emerging countries and the largest trading country in the whole world is undoubtedly more and more closely linked with other countries.On the one hand,the impacts of international factors are gradually deepened on the development of China's capital market.On the other hand,the linkage mechanism of domestic stock market,bond market and foreign exchange market are further strengthened.Based on those phenomena,this paper mainly uses the Principal Component Analysis principle to study the influence of exchange rate,foreign and domestic bond yields on the performance of China's stock indexes.Theoretically,I discuss the flow-oriented theory and IS-LM-IA theory between stock market and foreign exchange market separately,as well as the cash flow discounting theory between bond market and stock market.Besides,the Capital Asset Pricing Model is also studied.This paper analyzes the transfer mechanism of exchange rate and interest rate to stock price too.Empirically,on the basis of the data ranging from Jan.1,2013 to Nov.30,2016,I make and test models with MATLAB and EVIEWS software.I construct several variables originally.Among them,the endogenous variable is the daily return rate of the Shanghai Composite Index,some main exogenous variables are the spot exchange rate of RMB against USD and 10-year bond yields in China,the United States respectively.In order to eliminate the multiple collinearity between the original independent variables,I choose the principal component regression method,and finally choose two principal components,according to its constituent forms,F1 is expressed as the comprehensive external factors proxy variable of the exchange rate and the China,US bond yields,and F2 is expressed as the intrinsic factors proxy variable of the yield itself lagged one period.In the regression model with the principal component as the independent variable,although the multiple collinearity is eliminated,the significance test cannot be passed.The final model shows that the principal components F1 and F2 are negatively correlated with the dependent variable.F1 is negative correlation with the exchange rate,and positively related with the China,US bond yields,so,China's stock market is positively correlated with the RMB exchange rate,and negative with the China and the United States bond yield.Among them,the impact of China's bond yields on the stock market follows the total social supply and demand effect and asset portfolio substitution effect.The impact of exchange rate on the stock market follows the competitive effect,and the negative correlation between US bond yields and China's stock market is also consistent with the theory.In addition,the stock index itself lagging proxy variable F2 and the dependent variable was negatively correlated,it also complies with the normal ups and downs in the A-share market.Finally,the optimal lag orders of the exchange rate and the bond yield of China and the United States are 1,and the optimal lag order of the stock itself is 2 and 3.At the same time,stock index performance is also affected by time factors.In short,the exchange rate,China,US bond yields can indeed have a significant impact on China's A-share market,and the time lag effect is obvious.In order to maintain academic rigor,the final model not only passed the ADF unit root test to ensure the stability of the variables;passed the Co-integration test to illustrate the long-term equilibrium relationship between the variables,but also passed the White noise test and Heteroscedasticity test to further exclude the possibility of pseudoregression,and the Granger causality analysis was conducted as well.Finally,I put forward three suggestions to improve the stability and profitability of China's stock market.In a word,I hope that the reasonable economic model gotten in this paper can more fully reveal both the domestic and foreign factors which can influence the changing trend of the Shanghai Composite Index,so that more suitable forecast and investment decision can be made. |
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