The Research On The Correlation Between RMB Exchange Rate And Stock Price

With the rapid development of economic globalization,the changing relationship between the foreign exchange market and the stock market is becoming increasingly close.In the RMB foreign exchange market,the RMB exchange rate is the link between the currencies of the two countries.The stock price index in the stock market is seen as an indicator of domestic macroeconomics.The RMB exchange rate and the stock price index are two kinds of financial market prices respectively,and there must be some kind of internal link between them.In other words,exchange rate fluctuations may cause the stock price to change.Conversely,stock price changes will also cause exchange rate fluctuations.Therefore,in order to analyze the intrinsic relationship between the foreign exchange market and the stock market in detail,this paper will conduct in-depth research on the relationship between the exchange rate of RMB and stock price and the transmission mechanism through co-integration test,vector auto-regression model and variance decomposition.This not only helps us to profoundly understand the internal linkage between different financial markets,but also has important theoretical and practical significance for preventing financial market risks,improving capital market reforms,and protecting the legitimate rights and interests of investors.This article mainly studies the internal logic between the RMB exchange rate and the total A-shares index,and analyzes the correlation between the foreign exchange market and the stock market.By adopting a combination of theoretical analysis and empirical testing,we will fully explain the changing relationship between the foreign exchange market and the stock market.This article mainly includes five aspects: the first part is the introduction part,which mainly introduces the background,significance,the specific content of the article,the research methods,the innovation of the article and some areas that need improvement in the future;the second is the literature review section at home and abroad;the third part is the theoretical basis,First,introduce the two classical theoretical models,and then introduce the conduction mechanism between exchange rate and stock price under various conditions;the fourth is data processing and empirical analysis,First,the source of the sample data is explained,Then the variable is selected,Then the theoretical model is constructed,Finally,the RMB exchange rate and stock price are analyzed using co-integration test,vector auto-regression model and variance decomposition,In addition,this article also deeply studied the internal relationship between the RMB exchange rate and the industry sectorindex;the fifth part is the conclusion part,First of all,it sums up and summarizes the results of the empirical part,and analyzes the economic significance represented by the conclusion,Finally,it makes reasonable suggestions based on the domestic basic national conditions.Empirically,select the sample date for the exchange rate of RMB against the US dollar and all A-shares from June 30,2011 to June 30,2016.Firstly,simple processing of sample data,simulation of the preparation of Shanghai Stock Index,construction of the index index of all A-shares comprehensive index,and then building a model based on the theoretical basis,Finally,using various measurement methods to analyze the internal linkage between RMB exchange rate and stock price.The empirical results show that there is a weak negative correlation between the exchange rate of the RMB against the U.S.dollar and the overall index of all the A shares,that is,the appreciation of the yuan increases the price of shares.In the long run,there is a balanced co-integration relationship between the RMB exchange rate and the stock price,and the RMB exchange rate is the Granger cause of the stock price,and the stock price is not the Granger cause of the RMB exchange rate.Further,from the perspective of the relationship between the RMB exchange rate and various industry sector index,the five industries of real estate,finance and insurance,transportation and warehousing,Mining and manufacturing have a long-term co-integration relationship with the RMB exchange rate.And the RMB exchange rate against the U.S.dollar is the Granger cause for these industry index.Finally,China should advocate a value investment philosophy,eliminate the herding effect of investors,and make investors pay more attention to the performance of listed companies and form a value-based investment philosophy.