Analyzing time–frequency relationship between interest rate, stock price and exchange rate through continuous wavelet

Andrieş, Alin Marius; Ihnatov, Iulian; Tiwari, Aviral Kumar

doi:10.1016/j.econmod.2014.05.013

Cited by 76 publications

(42 citation statements)

References 28 publications

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“…During times of instability, investors replace stocks with high quality bonds resulting in a decrease in stock prices and lower bond yields, causing a positive correlation. Andrieș et al (2014) reported that stock price movements tended to lead interest rates in the first part of their sample period which is consistent with adaptive behaviour on part of monetary authorities; however stock prices subsequently lagged interest rates.…”

Section: Interest Ratessupporting

confidence: 58%

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Camilleri

Scicluna

Bai

2019

The North American Journal of Economics and Finance

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This study examines the connections between stock prices and key macroeconomic indicators: inflation, industrial production, interest rates, money supply and select interactions between the latter group of variables. Such links are evaluated through vectorautoregressions (VARs) on monthly data spanning over the period 1999-2017, for Belgium, France, Germany, Netherlands and Portugal. We check whether such relations are confirmed across different sub-periods and also adopt a non-parametric approach by using a Pesaran-Timmermann test. We find different contemporaneous and lead-lag relationships between stock prices and the selected variables, although there are variations across countries. VAR models indicate that stock prices significantly lead inflation across all countries during the sample period and in most cases this relationship was positive. In addition, stock prices significantly lead industrial production in four of the sampled countries and these relationships were positive as well. Contrary to long-established finance theories, we did not find numerous significant links between interest rates and stock indices; however the interaction between interest rates and money supply was a leading indicator of stock prices in France, Germany and Portugal.

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Section: Interest Ratessupporting

confidence: 58%

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Camilleri

Scicluna

Bai

2019

The North American Journal of Economics and Finance

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“…The widespread adoption of floating exchange rates regimes by many countries and increased integration of the global financial system have encouraged capital flows among countries, and these have evoked researchers" interests to study the link between financial and foreign exchange markets (Phylaktis and Ravazzolo, 2005;Tsai, 2012;Liang et al, 2013;Ndako, 2013;Andrieș et al, 2014;Stillwagon, 2016). Evidence of strong relationship between the two markets is instructive for domestic policy making and portfolio reallocation because shocks to either market may be transmitted quickly to another or to the domestic economy through various contagious channels (Chkili and Nguyen, 2014;Sensoy and Sobaci, 2014;Dahir, et al 2017;Leung et al, 2017).…”

Section: Introductionmentioning

confidence: 99%

Modelling stock price–exchange rate nexus in OECD countries: A new perspective

Salisu

Ndako²

2018

Economic Modelling

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“…Some studies document that interest rates and market returns are negatively related (Abdullah & Hayworth 1993;Hamrita & Trifi, 2011;Andries et al, 2014). Some studies document that interest rates and market returns are negatively related (Abdullah & Hayworth 1993;Hamrita & Trifi, 2011;Andries et al, 2014).…”

Section: Data and Summary Statisticsmentioning

confidence: 99%

“…The interest rate is found to be one of the key determinants of stock prices. Some studies document that interest rates and market returns are negatively related (Abdullah & Hayworth 1993;Hamrita & Trifi, 2011;Andries et al, 2014). This negative relationship is often attributed to changes in the discount rate.…”

Section: Data and Summary Statisticsmentioning

confidence: 99%

Can Macroeconomic Variables Explain Managed Fund Returns? The Australian Case

Luo

Liu

2017

J of App Econs and Policy

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We investigate the relationship between 24 different categories of Australian managed funds and 13 macroeconomic variables from the third quarter of 1998 to the first quarter of 2013. Using principal component and regression analyses, we find that fund returns can be significantly explained by principal components that reflect both the international and domestic variables, especially at the next two quarters. The relationships between fund returns and macroeconomic variables are predominantly negative. Further, the pooled regression results show that, at a more general level, the explanatory power of macroeconomic variables is relatively weak on fixed interest and on international shares funds, but is strong on multiple assets, property, and Australian shares funds.We obtain the quarterly managed fund data in 24 different categories from The Plan for Life and the 13 macroeconomic data from DataStream for the sample period spanning from 1998:Q3 to 2013:Q1. 2 Since the results of K = 1, 3, and 4 are less significant than K = 2, only the results of K = 2 will be reported for the sake of brevity.

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Analyzing time–frequency relationship between interest rate, stock price and exchange rate through continuous wavelet

Cited by 76 publications

References 28 publications

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Do stock markets lead or lag macroeconomic variables? Evidence from select European countries

Modelling stock price–exchange rate nexus in OECD countries: A new perspective

Can Macroeconomic Variables Explain Managed Fund Returns? The Australian Case

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