Analysis of relationship and volatilities between foreign exchange market and stock market of Thailand and selected Asian countries

The article attempts to examine interdependence between Indian stock market and other domestic financial markets, namely, foreign exchange market, bullion market, money market, and also Foreign Institutional Investor (FII) trade and foreign stock markets comprising one regional stock market represented by Nikkei of Japan and other stock market for the rest of the world represented by Standard & Poor’s (S&P) 500 of the USA. Attempts are also made to examine asymmetric volatility spillover, first, between the Indian stock market and other domestic financial markets and second, between the Indian stock market and global stock markets (represented by Nikkei and S&P 500) along with the foreign exchange market. To measure linear interdependence among multiple time series of financial markets multivariate Vector Autoregression (VAR) analysis, Granger causality test, impulse response function and variance decomposition techniques are used. For estima-ting the volatility spillover among the aforesaid markets Dynamic Conditional Correlation-Multivriate-Threshold Autoregressive Condi-tional Heteroscedastic (DCC-MV-TARCH) (1, 1) model is applied on daily data for a quite long period of time from 01 April 1996 to 31 March 2012. The results of multivariate VAR analysis, Granger causality test, variance decomposition analysis and impulse response function estimation establish significant interdependence between domestic stock market and different other financial markets in India and abroad. The results of DCC-MV-TARCH (1, 1) model estimation further show signi- ficant asymmetric volatility spillover between the domestic stock market and the foreign exchange market and also from the domestic stock market to bullion market and changes in gross volume of FII trade. We also find (a) both way asymmetric volatility spillover between the domestic stock market and the Asian stock market and (b) its unidirectional movement from the world stock market to the domestic stock market. The results of the study may help market regulators in setting regulatory policies considering the inter-linkages and pattern of volatility spillovers across different financial markets. JEL Classification: G15, G17

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Stock market performance and foreign exchange market in Egypt: does 25th January revolution matter?

International Journal of Emerging Markets ◽

10.1108/ijoem-11-2017-0477 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Ahmed A. El-Masry ◽

Osama M. Badr

Keyword(s):

Stock Market ◽

Causal Relationship ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Market Performance ◽

Exchange Market ◽

Content Type ◽

Stock Market Performance ◽

Portfolio Managers ◽

Market Indexes

PurposeThis paper examines the causal relationship between stock market performance and foreign exchange market in Egypt over the period 2009–2016. The study period is divided into two sub-periods: pre- and post-January 25th Egyptian revolution (ER). The reason is to examine how this revolution affects the causal relationship between the two markets' performance.Design/methodology/approachIn this study, the daily basis data are used to enable good and effective observation changes in the foreign exchange rate and stock market performance over time. Stock market indexes and stock market capitalization are used as proxies for stock market performance. Further, the Egyptian pound to US$ exchange rate is used as a measure for foreign exchange market performance. The study analysis is done in stages. The first is to check the variables' stationarity for the pre- and post-revaluation. The second is to examine the cointegration among the variables. The third is to run vector autoregression (VAR) estimates, after which VAR Granger causality tests are employed.FindingsThe results show that the data are not stationary at their levels but stationary in their first difference level while there is no cointegration in the long-run among the variables in both sub-periods. Further, findings indicate that, in the pre-January 25th revolution period, there is a significant causal relationship between the foreign exchange market and stock market indexes and a significant causal relationship between market capitalization (CAP) and exchange rate at the 1% level. However, in the post-January 25th revolution period, the study does not find a significant causal relationship between foreign exchange market and stock market indexes and capitalization.Research limitations/implicationsAs this study focuses on the causal relationship between foreign exchange and stock markets before and after the 25th January Revolution, other macroeconomic variables such as consumer price index, interest rate and GDP were excluded for the comparison purposes with other studies. Further research is suggested to include them in the analysis to find out its effect on the performance of stock market and foreign exchange market.Practical implicationsThe existence of long-run bidirectional causality means that portfolio managers and hedgers may have improved their understanding regarding the dynamic relationship between foreign exchange market and stock market performance as this may help them to plan and implement suitable hedging strategies to guard against currency risk in future crises or events. Investors, fund and portfolio managers and policymakers should give much attention to these event-specific interactions when they make capital budgeting decisions and implement regulation policies. Furthermore, our results may allow portfolio managers, investors and policymakers to assess the importance of informational efficiency for both markets.Originality/valueThis paper is an original contribution to the literature that concerns the causal relationship between stock market and foreign exchange market in the period of political instability and social unrest such as the January 25th Revolution in one of the emerging markets, namely Egypt.

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An Empirical Study on the Interdependence among Stock Market, Commodities Market and Foreign Exchange Market

IOSR Journal of Economics and Finance ◽

10.9790/5933-0804010107 ◽

2017 ◽

Vol 08 (04) ◽

pp. 01-07 ◽

Cited By ~ 1

Author(s):

Dr. P. Sri ram

Keyword(s):

Stock Market ◽

Empirical Study ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Exchange Market

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Cointegration and Causality Relationship Between Stock Market, Money Market and Foreign Exchange Market in Pakistan

Journal of Systems Science and Information ◽

10.21078/jssi-2017-001-20 ◽

2017 ◽

Vol 5 (1) ◽

pp. 1-20

Author(s):

Ghulam Abbas ◽

Roni Bhowmik ◽

Laxmi Koju ◽

Shouyang Wang

Keyword(s):

Stock Market ◽

Granger Causality ◽

Foreign Exchange ◽

Foreign Exchange Market ◽

Money Market ◽

Exchange Market ◽

Long Run ◽

Equilibrium Relationship ◽

Causality Relationship ◽

Long Run Equilibrium

AbstractThis paper examines the relationship between stock market (KSE-100), money market (M2 and 180 days T-bill rate), and foreign exchange market (ER: PKR/USD) in Pakistan by using monthly data covering the period from 2000:M1 to 2015:M12. The study investigates long-run equilibrium relationship between these three financial markets by employing Johansen and Juselius[1] cointegration tests. Long-run and short-run causality relationship between stock market and other macroeconomic variables is also established by employing vector error correction model (VECM) and pairwise granger causality tests. The results of multivariate cointegration test (trace test) indicate a one cointegrating vector, and the significant normalized cointegrating coefficients are evident of long run equilibrium relationship between all the selected variables. Negative and significant ECT (− 1) for all variables during full sample period witness the presence of long-run causality connection among variables, while during the military regime and democratic regime, significant difference of long-run causal connections are identified across the regimes. Moreover, the results of granger causality test also indicate that there are significant variations in the causality relationship among variables across the regimes. Therefore, it is essential for forecasting, planning and policy making to consider the importance of political governance system while analyzing the historical cointegration among financial market and make the necessary adjustments accordingly.

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