Research On The Spill-over Effect Of Volatility Between Stock Market And Exchange Market Based On GARCH Mode

In recent years,with the rapid development of domestic information technology and the gradual relaxation of financial control,the demand for liberalization and market globalization are also increasing.Stock market and foreign exchange market have gradually become market-oriented under the influence of market-oriented economy,and at the same time strengthen the correlation between stocks and foreign exchange.Therefore,it is necessary to conduct an in-depth study of the volatility spillover between the stock and foreign exchange markets.On the basis of combing the existing literature,this paper puts forward the theoretical model of volatility spillover effect between stock market and foreign exchange market by explaining the related concepts of volatility spillover,the formation mechanism and transmission mechanism of volatility spillover between stock market and foreign exchange market.Based on the daily transaction data of the Shanghai Composite Index and the RMB against the US dollar exchange rate from July 21,2005 to February 8,2018,this paper takes the second exchange reform in June 2010 as a structural change point.All data are divided into the analysis was carried out before the second exchange reform and after the second exchange reform.Effectively combined with the research methods of empirical research and theoretical analysis,through the Granger causality test,cointegration test and unit root test,in-depth discussion of the correlation between the Shanghai Composite Index and the exchange rate,through the binary BEKK-GARCH model,for the exchange rate of RMB against the US dollar The volatility spillover phenomenon of the Shanghai Composite Index is analyzed.Based on the empirical analysis of the research sample,the stock market will be affected by the RMB exchange rate reform,and the exchange rate reform will further strengthen the correlation between the exchange rate and the stock market.Therefore,with the deepening of exchange rate reform policy and the development trend of international financial integration,the more obvious the risk transfer effect between China’s stock market and foreign exchange market is,the stronger the volatility spillover effect between markets is.In-depth study of the internal relations between them can effectively promote the development of financial markets and have important practical significance in promoting the stability of domestic financial markets.