Exchange Rate, Investor Sentiment, and Fluctuation of China A-share Market

Abstract

The development quality of China's stock market is related to the healthy development of the financial system and national economy, and it also affects the development speed of urbanization. Based on time series VAR model and EViews, this paper use the exchange rate of RMB and investor sentiment to conduct empirical analysis on the fluctuations of China's A-share market. Through computer simulation and calculation, the experimental results show that the change in investor sentiment and the fluctuation of the Chinese A-share market are Granger causes for each other. The impact of the changes in investor sentiment on the volatility of China's A-share market is stronger than that of changes in the RMB exchange rate, but the impacts are both limited. This paper illustrates the dynamic relationship between the volatility of China's A-share market, RMB exchange rate, and investor sentiment.