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Dynamic Dependence Structure between Chinese Stock Market Returns and RMB Exchange Rates

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  • Rong Li
  • Zongyi Hu
  • Sufang Li
  • Keming Yu

Abstract

This paper investigates the dynamic dependence structure between the Chinese stock market and the real exchange rate of the Chinese renminbi (RMB) with unconditional and conditional copula models for the period July 22, 2005, to December 31, 2017. The results show that the crisis induced significant structural breaks, and the relationship is weak before the global financial crisis but substantially stronger after the financial crisis, regardless of whether the correlation is positive or negative. Our findings have important implications for global portfolio diversification, risk management, and China’s exchange rate policy.

Suggested Citation

  • Rong Li & Zongyi Hu & Sufang Li & Keming Yu, 2019. "Dynamic Dependence Structure between Chinese Stock Market Returns and RMB Exchange Rates," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(15), pages 3553-3574, December.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:15:p:3553-3574
    DOI: 10.1080/1540496X.2019.1624522
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    Cited by:

    1. Ni, Jianhui & Ruan, Jia, 2024. "Contagion effects of external monetary shocks on systemic financial risk in China: Evidence from the Euro area and Japan," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    2. Qiao, Xingzhi & Zhu, Huiming & Zhang, Zhongqingyang & Mao, Weifang, 2022. "Time-frequency transmission mechanism of EPU, investor sentiment and financial assets: A multiscale TVP-VAR connectedness analysis," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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