The Non-Linear Effect Of Exchange Rate Expectation And Foreign Exchange Intervention On Stock Prices

Over the past decade,with the development of economic globalization and the deepening of China's financial market reform,the domestic capital market and the foreign exchange market has formed more closely relationship.The stock market,as an important part of the capital market,reflects the influence of foreign exchange changes.Since the reform of the exchange rate reform,the RMB return the appreciation channel.In addition to the stage devaluation during the financial crisis,the RMB exchange rate has been in a continuous appreciation of expectations.Until April 2014 this appreciation is expected to appear in the opposite direction.At the same time,the stock market has also experienced multiple rounds.of change.China's stock market in 2007 reached the historical prosperity bull.It's including the middle from the foreign exchange market to the capital market price self-strengthening cycle to promote.June 2015 the stock price plummeted,has also been affected by the expected depreciation of the exchange rate.At the same time China's foreign exchange market has long-term foreign exchange intervention.This will affect the exchange rate changes and the domestic stock prices.Although the central bank said that the future will gradually withdraw from the normalized market intervention.But the foreign exchange intervention is still an important means to maintain the stability of the national exchange rate level and can't be ignored.Therefore,this paper is from the perspective of foreign exchange intervention,to clarify the exchange rate expectations,foreign exchange intervention and the relationship between the stock prices.We will understand the transmission mechanism between exchange rate and stock prices.Provide guidance for foreign exchange management and foreign exchange intervention.Which is of great significance to promote the market-oriented reform of exchange rate and to maintain the stable development of domestic capital market.Learn from other scholars' heterogeneous models of investors.Then,considering the exchange rate expectation and the dynamic influence of foreign exchange intervention on the stock price,we use the STR smooth transfer regression model to test the effect of exchange rate expectation and foreign exchange intervention on the stock price from June 2011 to April 2017.Based on the linearity and non-linearity of STR model,the STR model is tested-with no additional non-linearity and parameter stability.At the same time,this paper also put forward the use of off-shore exchange rate deviation as a measure of changes in foreign exchange intervention indicators can be closer to the actual situation reflects the extent of the central bank's foreign exchange intervention and changes in direction.The results of this paper are:when the RMB exchange rate is in the expected depreciation,the impact on the stock price is negative and it will be less than the depreciation of the expected impact on the stock more intense,and in the appreciation Expected in the opposite direction.Foreign exchange interventions will also have a stronger impact on stock prices than in moderately expected appreciation and depreciation expectations.At the same time,due to the different direction of exchange rate expectations.The impact of exchange rate expectation on stock prices will also show different characteristics.Under negative foreign exchange interventions Higher than the expected effect of exchange rate expectations on the stock price.It is concluded that exchange rate expectations and foreign exchange intervention in different economic and financial context,will have a different impact on stock prices.In the continuous opening of China's capital account and the deepening of the market-based exchange rate and interest rate,more needs to be combined with changing realities to strengthen the management of exchange rate expectations while maintaining a reasonable degree of intervention in the foreign exchange market in order to reduce the changes in the foreign exchange market The abnormal fluctuations brought by the domestic capital market will be conducive to the steady development of China's financial market.