This paper studies the correlation between USD/RMB exchange rate and CSI 300 index in the context of Sino-US trade frictions. Through ADF unit root test, Johanson cointegration test, impulse response and variance decomposition, VAR model and other empirical tests, the results reveal that the correlation between USD/RMB exchange rate and CSI 300 index is subjected to the intensity of Sino-US trade friction. The escalation of trade friction confrontation introduces higher negative correlation between USD/RMB exchange rate and CSI 300 index, the depreciation of RMB, and the decline of CSI 300 index. With strong reflexivity of the stock market index fluctuation trend, the major short-term sentiment fluctuation of the stock market indicates that China's stock market is still a weak-form efficient market.

Jianguo Zhou. An Empirical Analysis on Correlation between Exchange Rate and CSI 300 Index under Sino-US Trade Friction. Academic Journal of Business & Management (2024) Vol. 6, Issue 3: 89-99. https://doi.org/10.25236/AJBM.2024.060311.

[1] Lun Chen, Research on the correlation between the USD/RMB exchange Rate and the CSI 300 index after the exchange rate reform [D]. Central China Normal University, 2014.

[2] Xiaoli Cui. Research on the co-movement between the volatility of the USD/RMB exchange rate and the volatility of China's stock market—Based on the MCMC method [D]. Chongqing University of Technology, 2016

[3] Yiping Guo. Research on the interaction between foreign exchange market and stock market in the process of financial opening [D]. Xiamen University, 2014

[4] Jing Chen, Handong Li. Research on the correlation between Chinese market exchange rate volatility and stock market price fluctuations [J]. Journal of Beijing Normal University (Natural Science), 2008(6):645-648.

[5] Lanfu Yan. An empirical study on the impact of USD/RMB exchange rate on China’s share prices [D]. Central South University, 2012.

[6] Jie Yang. An empirical study on the correlation between exchange rate changes and securities prices [D]. Zhejiang Gongshang University, 2010.

[7] Zuguo Zhang, Wenbo Luo. Research on the relationship between stock market returns and the USD/RMB exchange rate during the subprime lending crisis [J]. Guangdong Academy of Social Sciences, 2009(4): 28-35.

[8] Fangfang Zhang, Zhuo Zhang. Research on the relationship between the USD/RMB exchange rate and share price [J]. Finance and Accounting Monthly, 2009(36): 45-46

[9] Jun Zhao. An empirical analysis of the fluctuation of USD/RMB exchange rate on China’s stock market—From the perspective of long-term dynamic relationships [J]. Foreign Investment in China, 2011(12): 64-65.

[10] Caporale, G.M., Hunter, J. and AJi, F.M. On the linkages between stock prices and exchange rates: Evidence from the banking crisis of 2007-2010[J]. International Review of Financial Analysis, 2014, 33(12):87-103.