Research On The Information Spillover Effect Between China's Stock Market And Foreign Exchange Market Before And After The China-US Trade Friction

As China's financial industry continues to deepen reforms and accelerate opening up,the linkage mechanism between the Chinese stock market and the foreign exchange market is closer,and fluctuations in stock prices on the stock market can more obviously cause fluctuations in the RMB exchange rate.It also more obviously caused fluctuations in the price of RMB-denominated stock assets.Since the 18 th National Congress of the CPC,the CPC Central Committee has attached great importance to the prevention and mitigation of systemic financial risks.General Secretary Xi Jinping has repeatedly emphasized the need to work hard to improve the financial security defense and risk emergency response mechanism.In this context,this article takes the external shock event of Sino-US trade friction as the research node.The outbreak of China-US trade friction coincides with the crucial period of China's economic transformation and upgrading.It has a certain impact on China's macro economy,financial market,foreign trade import and export,industrial upgrading,and the layout of opening up.This time point is used to study the changes in the information spillover effects(including mean spillover effects and volatility spillover effects)between China's stock market and foreign exchange market before and after the outbreak of the China-US trade friction.The impact of risk contagion provides a certain theoretical basis for policy makers to prevent and regulatefinancial market risks under external shock events,and provides relevant suggestions for investors to invest rationally and avoid risks.Based on the existing theory of researching the linkage mechanism of the stock market and the foreign exchange market,this article selects the data of the closing price of the Shanghai Composite Index from January 1,2013 to December 31,2019,and the data of the central parity price of the RMB to the US dollar.On March 8,2018,the China-U.S.Trade friction officially broke out as a time node.The VAR model was used to study the changes in the average spillover effect between the stock market and the foreign exchange market before and after the trade friction broke out,and the BEKKGARCH model was used to study the stock market before and after the trade friction.Changes in foreign exchange market volatility spillover effects.At the same time,in order to ensure the reliability of the research conclusions,this article also uses closing price data of RMB to the US dollar and the Shanghai and Shenzhen 300 index closing price data to conduct a robust test.The results of empirical analysis show that the mean spillover effect and volatility spillover effects of the stock market and foreign exchange market have changed significantly before and after the outbreak of China-US trade friction.From the perspective of the average spillover effect,before the outbreak of the China-US trade friction,the average spillover effect of the stock market and the foreign exchange market was not obvious,but after the outbreak of the China-US trade friction,the stock market and the foreign exchange market showed a significant mean spillover effect.Because the stock market yield has a significant negative mean spillover effect on the foreign exchange market yield,the foreign exchange market yield also has a significant negative mean spillover effect on the stock market yield.From the perspective of volatility spillover effects,according to the BEKK-GARCH model and Wald test results,before the outbreak of Sino-US trade friction,there was a one-way volatility spillover from the foreign exchange market to the stock market,and the volatility spillover effect from the stock market to the foreign exchange market was not obvious.However,after the outbreak of trade frictions,this volatility spillover effect changed from one-way to two-way volatility spillover effects,which shows that the linkage between the stock market and the foreign exchange market has increased significantly after the outbreak of trade frictions.Under the impact of external events,The contagion of risksbetween markets has increased.Lastly,in view of the conclusions of empirical research,this article explains the reasons for the closer linkage between the stock market and the foreign exchange market after trade frictions,Explore from the perspective of economics and finance,in combination with the inevitability and prospect of the outbreak of ChinaUS Trade frictions,gives related policy suggestion.