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The relationship between stock prices and exchange rates has received a great deal of attention. In investigating the link between the two variables most studies have concluded that the relation… Click to show full abstract
The relationship between stock prices and exchange rates has received a great deal of attention. In investigating the link between the two variables most studies have concluded that the relation is short run and the two variables have no long run relationship. Furthermore, all existing studies have assumed that the effects of exchange rate changes on stock prices are symmetric. In this paper we use monthly time-series data from 24 countries and non-linear ARDL method to show that the effects of exchange rate changes on stock prices could be asymmetric. The same is true when we consider the effects of changes in stock prices on the exchange rate. Introducing nonlinearity yields relatively more support for asymmetric cointegration compared to symmetric cointegration.
Journal Title: Journal of Economics and Finance
Year Published: 2017
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