The Exchange-Rate Risk Exposure of Asset Returns

Chow, Edward H.; Lee, Wayne; Solt, Michael E.

doi:10.1086/209710

Cited by 250 publications

(145 citation statements)

References 11 publications

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“…From (3), it can be redrawn as: (5) From (5) (6) represents Kronecker product, C represents p x n(1+n(p+d)) constraint matrix. The assumption of No Granger causality can be redraw as H0: Cβ=0.…”

Section: Toda-yamamoto Causalitymentioning

confidence: 99%

“…There are also many overseas conclusions that the relationship between Exchange rate and stock prices does not exist. Chow [6], using stock market monthly data, found that the correlation between Exchange rate and stock prices is not significant. Yang and Doong [7] using EGARCH method to analyze seven western countries, the result does not come to the conclusion of the correlation between the two.…”

Section: Introductionmentioning

confidence: 99%

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Empirical Studies of the Relationship between RMB Exchange Rate and Stock Prices

An¹

2017

dtssehs

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Studies of the relationship between Exchange rate and stock price volatility after the 2008 international financial crisis, preventing financial risks of China, and consummating capital markets and foreign exchange mechanism is theoretically and practically significant. The classification based on the causality between price and exchange rate, puts the financial crisis exchange rate and Shanghai Composite index into the assumption that there is a causal relationship, from January 2008 to June 2014, between RMB exchange rate index and empirical analysis based on rolling correlation analysis method. There is a studies result that, there is contemporaneous correlation between the real exchange rate of RMB against the U.S. dollar and the trend of Shanghai composite index, and there is an advance correlation from Shanghai composite index's volatility relating to currency volatility. This article based on TodaYamamoto causality test, found that there is an interrelationship of Granger causality between the actual fluctuation of exchange rate and the Shanghai composite index, and there is no Granger causality between the trend of actual exchange rate and the trend of Shanghai composite index movements.

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Section: Toda-yamamoto Causalitymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Empirical Studies of the Relationship between RMB Exchange Rate and Stock Prices

An¹

2017

dtssehs

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show abstract

“…(Bahmani-Oskooee and Sohrabian, 1992), using monthly values of S&P 500 index and US dollar effective exchange rate over the period of 1973-1998, and employing co-integration analysis and the Granger causality test, showed that there was a bidirectional causality in the short run and no long run relationship between these two variables. On the other hand, (Chow et al, 1997) conducted this issue in the same markets with a longer time horizon, and found a positive relationship between stock returns and real exchange rate returns. (Ajayi and Mougoue, 1996) employed the co-integration and causality tests on daily stock indices and exchange rates in eight industrial economies during the period 1985-1991.…”

Section: Literature Reviewmentioning

confidence: 99%

An Empirical Test on Linkage Between Foreign Exchange Market and Stock Market: Evidence from Hungary, Czech Republic, Poland and Romania

Hung

2017

ESJ

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The paper aims to examine the causal relationship between the stock prices and exchange rates in Hungary, Czech Republic, Poland and Romania. The investigation employs Granger's Causality test and Vector Auto Regression technique on monthly stock return and the foreign exchange rate for the period October 31, 2008 to September 18, 2017. The major findings of the study that there is no Granger's causality between the exchange rate return and stock return in these countries. The study also uses Vector Auto Regression modeling to confirm that though stock return and exchange rate are related to each other but any consistent relationship does not exist between them. Our results have provided beneficial information for investors, government policies and researchers.

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“…16 Not only is unexpected inflation useful as a real value hedge for liability management (see Leibowitz and Henriksson [1988]), but may also be useful in explaining asset class behavior (Bodie [1976]; Nelson [1976]; Jaffe and Mandelker [1976]; Fama and Schwert [1977]; Chen et al [1986]; Elton et al [1995]; Brandt and Wang [2003]; Ludvigson and Ng [2009]). 17 Similar to the unexpected inflation factor, unexpected changes in the dollar exchange rate is not only useful as a hedge for liability management, but may also be useful in explaining asset class behavior (Agarwal and Naik [2004]; Hasanhodzic and Lo [2007]; Ferson and Harvey [1993]; Chow et al [1997]). Further, there is general consensus regarding the advantages of hedging foreign currency exposure in fixed income and developed equities (Perold and Schulman [1988]; Kritzman [1993]; Eun and Resnick [1988]; Campbell et al [2010]).…”

mentioning

confidence: 99%

Flexible Indeterminate Factor-Based Asset Allocation

Blyth

Szigety²,

Xia³

2016

JPM

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Asset allocation represents a fundamental strategic decision for every institutional investor.Though many asset allocation approaches have been recommended and implemented in various forms, each has its own strengths and weakness. A careful review of current asset allocation frameworks provided motivation to design a hybrid approach that addresses many of these perceived individual shortcomings. Our guiding principle was to use several familiar elements to create a flexible process that incorporates less-quantifiable investment ideas around a rigorous foundation. The result, which we term Flexible Indeterminate Factor-based Asset Allocation (FIFAA), is an adaptive four-step asset allocation synthesis that remains quantitatively and theoretically well grounded. To achieve this goal, FIFAA overlays informed judgment about investment opportunities onto an objectively derived set of core factor exposures.ACKNOWLEDGEMENTS: The authors would like to thank the following people for valuable input and feedback:

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The Exchange-Rate Risk Exposure of Asset Returns

Cited by 250 publications

References 11 publications

Empirical Studies of the Relationship between RMB Exchange Rate and Stock Prices

Empirical Studies of the Relationship between RMB Exchange Rate and Stock Prices

An Empirical Test on Linkage Between Foreign Exchange Market and Stock Market: Evidence from Hungary, Czech Republic, Poland and Romania

Flexible Indeterminate Factor-Based Asset Allocation

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