An Empirical Analysis of the Impact of Exchange Rates on Stock Prices
DOI:
https://doi.org/10.54691/bcpbm.v15i.280Keywords:
Exchange Rates; Stock Prices; Robustness.Abstract
With the deepening of economic openness, the domestic capital market is increasingly linked to the foreign exchange market, and changes in the exchange rate of a country's currency are often accompanied by significant fluctuations in the level of stock prices. This paper selects the panel data of the stock prices of different listed companies and the exchange rate of RMB to SDR from the first quarter of 2017 to the fourth quarter of 2020 to conduct regression analysis and robustness test. The results show that there is a significant negative relationship between exchange rate (under the direct markup method) and stock prices. Compared with stocks with lower stock prices and B shares, stocks with higher stock prices and A shares are more affected by exchange rate changes. Therefore, China should be cautious in the process of promoting capital account opening and deregulation of exchange rate, strengthen the management of fluctuations in the foreign exchange and stock markets to prevent stock market bubbles, and promote the reform of the B-share market to improve the efficiency of corporate financing and make China's financial market more complete.
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