The foreign exchange and stock market nexus: New international evidence

Xie, Zixiong; Chen, Shyh‐Wei; Wu, An-Chi

doi:10.1016/j.iref.2020.01.001

Cited by 37 publications

(22 citation statements)

References 86 publications

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“…Therefore, Tunindex does not Granger causes the exchange rates for the Dollar and it appears that Granger causality runs one-way from stock market to the exchange market. This is consistent with Abdalla and Murinde (1997), Ajayi et al (1998), Salisu andNdako, 2018 andXie et al (2020) who found a causality running from the stock price to the exchange market supporting the stock oriented hypothesis.…”

Section: Granger Causality Testsupporting

confidence: 88%

“…In fact, money demand and investors 'wealth are linked to stock market performance (Gavin, 1989). The stock oriented hypothesis were supported by many studies (Tai, 2007;Lin, 2012;Tsai, 2012;Tsagkanos and Siriopoulos, 2013;Xie et al, 2020).…”

Section: Introductionmentioning

confidence: 89%

“…The dynamic conditional correlation (DCC)-GARCH models have been used in many studies (Chkili and Nguyen, 2014;Sensoy and Sobaki, 2014;Moore and Wang, 2014;Wong, 2017;Yang, 2017). The objective of this methodology is to "address the issues of the return interrelatedness and volatility spillovers between the two financial markets" (Hung, 2019;Xie et al, 2020).…”

Section: Dcc-fiaparch Methodologymentioning

confidence: 99%

“…Attari and Awan (2013) found a causality relation from stock returns to exchange rate between 1995-2012 in Pakistan, using a Granger causality test, a vector error correction model (VECM) and a cointegration method. Xie et al (2020) used a sample of 20 advanced economies and 6 emerging economies and employed the symmetric and asymmetric bootstrap panel granger non causality test. Their results showed also that stock prices are helpful for predicting the exchange rate and not vice versa.…”

Section: Literature Reviewmentioning

confidence: 99%

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The Dynamic Linkages Between Stock Market and Foreign Exchange Market: Evidence From an Emerging Market

Zaiane

Jrad

2020

IJEFI

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The paper investigates the dynamic linkages between exchange rate (against US dollar) and the stock market (local currency) of Tunisia from January 2004 to April 2017. In particular, the paper tries to answer if there are any correlations between these variables and how they move in high volatile periods. By using a VEC model and applying the techniques of Granger Causality test, we conclude the existence of a unidirectional relationship between the two variables (from stock prices to exchange rate). Due to persistent long memory and the presence of the asymmetric effect in both markets, we estimate the dynamic correlations between these variables using DCC-FIAPARCH model. Results reveal that volatility shocks create abrupt changes in the dynamic correlations. However, this effect is only short term and do not sustain between consecutive high volatility regimes. Thus, policymakers and investors do not need to be concerned about long run contagion effects. Accordingly, financial managers can obtain more insights in the management of their international portfolio affected by these two variables. This should be particularly important to domestic as well as international investors for hedging and diversifying their portfolio mainly by predicting the path of the exchange rate.

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Section: Granger Causality Testsupporting

confidence: 88%

Section: Introductionmentioning

confidence: 89%

Section: Dcc-fiaparch Methodologymentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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The Dynamic Linkages Between Stock Market and Foreign Exchange Market: Evidence From an Emerging Market

Zaiane

Jrad

2020

IJEFI

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“…Los estudios que examinan el vínculo entre el tipo de cambio y la bolsa de valores, y su direccionalidad concluyen que existen relaciones estadísticamente significativas y que, dependiendo del país(es) y periodo, el tipo de cambio causa a la bolsa de valores (Luzarraga-Goitia, Regúlez-Castillo y Rodríguez-Castellanos, 2020; Zarei et al, 2019) o la relación es en ambos sentidos (Hersy y Koy, 2020; Xie et al, 2020).…”

Section: Introductionunclassified

Impacto de la Incertidumbre de la Política Económica y del tipo de cambio en el mercado accionario a nivel internacional (2001-2020): un análisis de causalidad y cointegración de panel

Castro

Rodríguez²,

Olivares³

2021

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Este artículo analiza el impacto que la incertidumbre de la política económica local (EPU) y el tipo de cambio tienen sobre el mercado accionario de 14 países durante el periodo (2001-2020). Se busca analizar si existe un efecto diferenciado de la EPU y del tipo de cambio entre los mercados de países no desarrollados y desarrollados. Para ello se estiman tres modelos de panel cointegrado: uno general, uno para países no desarrollados y otro para desarrollados, y se realizan las pruebas de causalidad de Granger para los tres paneles. Los resultados sugieren que existen relaciones significativas y negativas de la EPU, y en el tipo de cambio hacia la bolsa de valores; los índices bursátiles de países desarrollados son más sensibles a la EPU y tipo de cambio. Se comprueba que existe causalidad unidireccional de la EPU hacia el índice bursátil.

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Do stock market fluctuations lead to currency deflation in the South Asian region? Evidence beyond symmetry

2022

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This study explores the role of the asymmetrical influence of stock market reaction to the fluctuations in US dollars against the domestic currencies of the South Asian region. The symmetrical Panel based autoregressive distributed lag model (PARDL) model and panel‐based non‐linear autoregressive distributed lag model (NARDL) model with the Pooled Mean Group Approach (PMG) approach were employed to estimate the impact of stock market bullish and bearish behaviour on local currency variabilities of the South Asian region. The results show that during the pre‐economic recession regime, negative fluctuations in stock indexes had a direct association with exchange rate fluctuations for a longer period. However, after the crisis, both negative and positive stock index shocks have formulated an indirect or inverse association with exchange rate fluctuations. These findings pose important practical implications for the short‐term and long‐term shareholders and financial analysts. Hence, it is recommended that shareholders and financial analysts should base their investment in South Asian stock indices on negative and positive shocks since the non‐linear connectivity between both variables also exhibits regime dependence characteristics.

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The foreign exchange and stock market nexus: New international evidence

Cited by 37 publications

References 86 publications

The Dynamic Linkages Between Stock Market and Foreign Exchange Market: Evidence From an Emerging Market

The Dynamic Linkages Between Stock Market and Foreign Exchange Market: Evidence From an Emerging Market

Impacto de la Incertidumbre de la Política Económica y del tipo de cambio en el mercado accionario a nivel internacional (2001-2020): un análisis de causalidad y cointegración de panel

Do stock market fluctuations lead to currency deflation in the South Asian region? Evidence beyond symmetry

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