Dynamics Between Exchange Rates and Stock Prices: Evidence From Developed and Emerging Markets

The International Journal of Business and Finance Research, v. 13 (1) p. 73-84, 2019

12 Pages Posted: 23 Mar 2019

See all articles by Van-Hop Nguyen

Van-Hop Nguyen

Chung Yuan Christian University

Date Written: 2019

Abstract

This study examines the long- and short-run dynamics between exchange rates and stock prices by using cointegration methodology and multivariate Granger causality tests. We apply the analysis to six countries, including: Japan, United Kingdom, Hong Kong, China, India and Brazil over the period December 2007 to May 2013. The evidence suggests that the global financial crisis 2007-2009 is an important determinant of the link between the domestic stock and foreign exchange markets. The exchange rate is negatively related to the domestic stock market for emerging countries but positively for developed countries for entire sample and during the crisis. However, this relationship became positive for all countries after the crisis, except United Kingdom. The finding also indicates that the exchange rate movements contain some significant information to forecast the stock returns of these markets.

Keywords: Stock Price, Exchange Rate, Global Financial Crisis, Multivariate Granger Causality Tests

JEL Classification: C3, F4, G1

Suggested Citation

Nguyen, Van-Hop, Dynamics Between Exchange Rates and Stock Prices: Evidence From Developed and Emerging Markets (2019). The International Journal of Business and Finance Research, v. 13 (1) p. 73-84, 2019, Available at SSRN: https://ssrn.com/abstract=3340191

Van-Hop Nguyen (Contact Author)

Chung Yuan Christian University ( email )

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