scholarly journals The Impact of Exchange Rates on Stock Markets in Turkey: Evidence from Linear and Non-Linear ARDL Models

2021 ◽  
Author(s):  
Mustafa Çakır
Keyword(s):  
Stock Market ◽  
Exchange Rates ◽  
Interest Rates ◽  
Stock Markets ◽  
Multivariate Models ◽  
Policy Makers ◽  
Asymmetric Effects ◽  
Long Run ◽  
Non Linear ◽  
Short Run

In this chapter we investigate the asymmetric impact of exchange rates on three major stock market indices in Turkey using four different ARDL models between 2003M1 and 2018M12. This chapter also attempts to differentiate the short-run and the long-run relationship between exchange rates and stock market indices namely BIST All shares, BIST National 100 index, and BIST National 30 index. Our motivating question is whether the relationship between exchange rates and three major stock market indices are symmetric or asymmetric in Turkey? To answer this, we first use the linear bivariate and multivariate models assuming the effects are symmetric. We then use the non-linear bivariate and multivariate models to examine whether exchange rate have symmetric or asymmetric effects on selected stock stock market indices in Turkey. The findings show that exchange rates have asymmetric effects on all three major stock market indices both in the short and long run. When we look at the long-run, the currency appreciation has positive and significant impact on selected stock markets but currency depreciation does not have an effect. This finding is in line with the understanding that Turkish sectors heavily depends on the import of raw and intermediate goods. The results also show that the economic activity has positive and significant effects on all stock markets implying that it is the main determinant in the long-run. Moreover, interest rates and volatility index were negative and significant in all markets. Thus, it has important implications for policy makers to provide stable prices and diverse investors.

scholarly journals Asymmetric Effects of Exchange Rate on Monetary Policy in Emerging Countries: A Non-Linear ARDL Approach in Uganda

2020 ◽  
Vol 7 (5) ◽  
pp. 24
Author(s):  
Allan Kayongo ◽  
Asumani Guloba ◽  
Joseph Muvawala
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Economic Uncertainty ◽  
Ardl Model ◽  
Real Money ◽  
Asymmetric Effects ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Exchange Rate Depreciation

Many money demand studies have been carried out on Uganda, however, these studies perceive and incorporate exchange rate as a linear determinant of real money demand. Indeed, exchange rate may have asymmetric effects on real money demand; with exchange rate appreciation having different effects from exchange rate depreciation. Therefore, this is the first study to estimate exchange rate asymmetries in Uganda, for the period 2008Q3 and 2018Q4. The study uses both the linear ARDL and non-linear ARDL methodologies to accomplish its goal. This is also done by incorporating an economic uncertainty index, which is critical, especially in light of the novel global coronavirus pandemic, that has disrupted trade, movement and supply chains. The error correction terms of both models are negative and significant, with the one of the non-linear ARDL twice as much as that of the linear ARDL. Indeed, the study confirms the existence of exchange rate asymmetries on Uganda’s real money demand. In the linear ARDL model, exchange rate has a positive effect in the long run but a negative result in the short run. On one hand, the non-linear ARDL model reveals that an exchange rate depreciation of the Uganda Shillings negatively affects real money demand in the short run. On the other hand, an exchange rate appreciation positively effects real money demand. Notably, economic uncertainty has insignificant effects in both models, except for its lags in the non-linear model. The implication of these findings is that macro-economic policy management in Uganda should be cognizant of these asymmetric effects of exchange rate, for effective planning, policy and implementation.

The Linkage between Chittagong Stock Market and Dhaka Stock Market

2021 ◽  
Vol 1 (1) ◽  
Author(s):  
Muhammad Shahidullah Tasfiq ◽  
◽  
Nasrin Jahan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Stock Price ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Variance Decomposition ◽  
Causality Test ◽  
Long Run ◽  
Short Run ◽  
Variance Decomposition Analysis

This paper aims at determining the relationship between the two domestic stock markets of Bangladesh – the Chittagong Stock Market (CSE) and the Dhaka Stock Market (DSE). The daily stock price indices that represent the performance of the two stock markets are collected. In order to find out the interdependent relationship, the Engle-Granger Cointegration test, Granger Causality test, Impulse Response Function, and Variance Decomposition Analysis are employed in this paper. The main finding of this study is that both the stock markets are related in the long run. However, there is a one-way short-run effect from the DSE on the CSE market. The CSE market quickly responds to the shock in the DSE market. But, the DSE market is not responsive to the CSE market. The variance decomposition analysis shows that most of the shocks in the CSE market are explained by its own market. On the other hand, a small number of shocks in the DSE market are explained by the CSE market as well as its own market.

Intensity of shock transmission amid US-BRICS markets

2015 ◽  
Vol 10 (3) ◽  
pp. 311-328 ◽  
Author(s):  
P. Lakshmi ◽  
S. Visalakshmi ◽  
Kavitha Shanmugam
Keyword(s):  
Stock Market ◽  
Granger Causality ◽  
Stock Markets ◽  
Subprime Mortgage ◽  
Content Type ◽  
Brics Countries ◽  
Long Run ◽  
The Us ◽  
The Usa ◽  
Short Run

Purpose – The purpose of this paper is to analyze the intensity of transmission of shocks from USA to BRICS countries in the long-run and short-run deviations and swiftness of recovery during US subprime mortgage crisis. This analysis enables the authors to explore the evolving patterns of relationships between these markets and examine whether their co-movements altered either in response to international shocks that originated in advanced markets like USA or due to their domestic fluctuations. Design/methodology/approach – Employing data of daily stock market indices (open and close) of BRICS countries for the period January 2, 2001 to May 31, 2012, this paper examines the interactions and characteristics of price movements of BRICS with US market by applying co-integration tests, vector error correction model and Granger causality relationship. The daily stock market indices data are derived from respective stock exchange web sites. Findings – The results exhibit that both long-run co-integration relationships and short-run Granger causality relationships exist between the stock markets of US-BRICS. Furthermore, this nexus is amplified in the short-run during 2007-2009, when the subprime mortgage financial crisis in the USA cropped up. This finding lends support to the prominence of developed (US) market links in the proliferation of persistent co-movements of BRICS stock markets. Research limitations/implications – The findings imply an increasing degree of global market integration due to quick dissemination of global shocks originating from developed market like USA, and swift recovery which can be attributed to the increased resilience, consistent with the moderated level of domestically driven risk in the BRICS markets. In spite of their similarities, long-run and short-run interdependences with the US stock market exhibit differences among the BRICS. This can be attributed to the regional heterogeneity in long-run risk and return co-movements with the USA. Practical implications – Changes from the US index easily affect these stock markets in the short-run, which implies that the US index may act as a leading indicator for investing funds in BRICS markets. Originality/value – This study would enable the authors to understand whether BRICS economies actually remain resilient to adverse developments in USA and could serve as alternative investment destinations for global portfolio diversification.

scholarly journals AN ANALYSIS OF STOCK MARKET INTEGRATION IN THE ASIAN DEVELOPED AND EMERGING MARKETS

2021 ◽  
Vol 9 (3) ◽  
pp. 1175-1190
Author(s):  
Sadiq Rehman ◽  
Asif Ali Abro ◽  
Ahmed Raza Ul Mustafa ◽  
Najeeb Ullah ◽  
Sanam Wagma Khattak
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Stock Markets ◽  
Impulse Response Function ◽  
Variance Decomposition ◽  
Short Term ◽  
Emerging Stock Markets ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Purpose of the study: This study investigates Short-run, Long-run, and Casual relationships in the Asian Developed and Emerging stock market indices for the period of 19 years weekly data of stock market indices of Asian Developed and Emerging Markets which are Japan (Nikkei 225), South Korea (KOSPI), Pakistan (KSE 100), China (SSE Composite), Sri Lanka (ASPI), India (BSE 200) and Malaysia (KLSE composite) from January 2001 to December 2019. Methodology: To analyze long-run and short-run relationships among the Asian developed and emerging stock markets, this study practices Descriptive Statistics, Correlation Matrix, Unit Root Test, Johansen Co-Integration Test, Vector Error Correction Model, Granger Causality test, Variance Decomposition and Impulse Response Function (IRF). Main findings: By employing the ADF and P.P. tests, the results specify that the entire variables' data are non-stationary and stationary in exact order, which is 1st difference. The Johnson Co-integration test found one cointegration relationship, where the results are consistent with Granger causality, Variance Decomposition, and Impulse Response Function (IRF). Application of the study: As the current research has focused on finding out the comovements in the Asian developed and emerging markets. So, the applications are that the survey found short-run and long-run relationships in these countries' stock markets. The study's originality: The current study has selected seven Asian developed and emerging stock markets and weekly updated time series data to investigate short-term and long-term linkages. So, this study found long-run comovements in these stock indices, which contributes to the literature. In addition, these stock markets have limited diversification benefits for international investors, while short-term diversification benefits may exist.

scholarly journals Are Banks And Stock Markets Positively Related? Empirical Evidence From South Africa

2010 ◽  
Vol 26 (6) ◽  
Author(s):  
Nicholas M Odhiambo
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Stock Markets ◽  
Real Income ◽  
Market Development ◽  
Bounds Testing ◽  
Critical Question ◽  
Stock Market Development ◽  
Long Run ◽  
Short Run

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><a name="OLE_LINK2"></a><a name="OLE_LINK1"><span style="mso-bookmark: OLE_LINK2;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;" lang="EN-GB"><span style="font-family: Times New Roman;">In this study, we examine the relationship between banks and stock market development in South Africa.<span style="mso-spacerun: yes;">&nbsp; </span>The study attempts to answer one critical question: Are banks and stock markets positively related in South Africa? The bank development is proxied by the ratio of the domestic credit to the private sector to GDP (DCP/GDP), while the stock market development is proxied by the ratio of the stock market capitalisation to GDP (CAP/GDP).Unlike the majority of the previous studies, the current study uses the newly introduced ARDL-Bounds testing approach, as proposed by Pesaran<span style="mso-spacerun: yes;">&nbsp; </span>et al. (2001), to examine this linkage. The empirical results show that there is a distinct positive relationship between banks and stock markets in South Africa. The results apply irrespective of whether the model is estimated in the short run or in the long run. <span style="mso-bidi-font-style: italic;">Other results show that in the short run, the stock market development in South Africa is positively determined by the level of savings, but negatively affected by the rate of inflation and the lagged values of the stock market development. However, in the long run, the stock market is positively determined by real income and the inflation rate. </span><span style="mso-spacerun: yes;">&nbsp;</span></span></span></span></a></p>

Impact of terrorism on stock markets across the world and stock returns

2019 ◽  
Vol 26 (3) ◽  
pp. 793-807 ◽  
Author(s):  
Laila Memdani ◽  
Guruprasad Shenoy
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Performance Measure ◽  
Short Term ◽  
Content Type ◽  
Global Indices ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Affected Country

Purpose The purpose of this paper is to study the following: short-run and long-run associations between the terror-affected country’s stock market index and other global countries’ equity indices and gold; the volatility of stock market indices when one of the countries is affected by a terrorist attack; and the linkages between terrorism and the returns in the selected stock markets. Design/methodology/approach To study the impact of the Taj attack on other global indices, the authors selected top five countries’ stock market indices, namely, FTSE, DJI, NIKKEI, SSEC and DAX. The short-run and long-run associations are also compared with gold. The authors used the autoregressive distributed lag model, LM test and bounds test for analyzing the short-run and long-run impact; ARCH family models to study the volatility impact; and the MAR model to study the impact on returns. Findings The authors found that all the global indices had a short-run association with the terror-affected country’s benchmark index, i.e. BSE. Gold moved as expected, with it having a short-run impact on the terror-affected country. All the global indices except DJI have volatility of share price movement either positively or negatively. As the benchmark of the terror-affected country fell, NIKKEI, HSI, IXIC, DAX and CAC also fell; that is, it had a positive influence on the terror-affected country’s index. Post the Mumbai attacks, DJI, NIKKEI, SSEC, DAX, BSE and CAC performed well in performance measure returns compared with the pre-attack period. Whereas, FTSE and GOLD performed well in performance measure returns in the pre-attack period compared with the post-attack period. GOLD proved that it is the best avenue to invest in, as it has only a short-term association with the terror-affected country’s index. Research limitations/implications The authors studied the short-run and long-run associations with only five countries’ benchmark indices. Practical implications The authors found that all the global indices had long- and short-run associations with the terror-affected country’s benchmark index, i.e. BSE. Global indices like DJI, NIKKEI, SSEC, DAX and FTSE had a short-term association with the affected country’s index. Gold moved as expected, with it having a short-run impact on the terror-affected country. All the global indices except DJI have volatility of share price movement either positively or negatively. As the benchmark of the terror-affected country fell, NIKKEI, HSI, IXIC, DAX, TSX, BVSP and CAC also fell; i.e., it had a positive influence on the terror-affected country’s index. Post the Mumbai attacks, DJI, NIKKEI, SSEC, DAX, BSE and CAC performed well in performance measure returns compared with the pre-attack period. Whereas, FTSE and GOLD performed well in performance measure returns in the pre-attack period compared with the post-attack period. GOLD proved that it is the best avenue to invest in, as it has only a short-term association with the terror-affected country’s index. In all the relationships were mixed with respect to terror attacks, and GOLD took the lead run out of all the associations it had in the 16-year time span from 2000 to 2016. Social implications The research has got an important implication to the investors. It shows that patience is the key, as all the indices had only short-term associations with the BSE. It implies that investors’ returns will be negative in the short run, but if they continue investing, in the long run, the impact of terrorism tapers out and the returns will increase. Originality/value There is a lot of research done on the impact of the US attacks on the stock markets of other countries, but on the impact of the Taj attack in India, there is hardly any research.

Cointegration of Asian Stock Markets: Empirical Evidence from India

2016 ◽  
Vol 6 (2) ◽  
Author(s):  
Beeralaguddada Srinivasa Veerappa
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Causality Test ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Short Run ◽  
Auto Regressive ◽  
Global Stock Markets ◽  
Indian Stock Market

At present stock return is significantly related to other global stock markets. The present paper empirically investigates the short run and long run equilibrium relationship between the stock market of India, Japan Hong Kong, Singapore, Malaysia, China, and Australia monthly data during January 1995 to December 2013. Researcher employs correlation test, multivariate co-integration framework, Vector Auto Regressive error-correction model and Granger causality test with reference to financial up evils in Asia and world viz., Asian crisis (1997/98), financial crisis (2008) Inflation conditions, Natural disasters, financial up evils etc. of long run relationship. Results find that the Indian stock market return is significantly co-integrated with long run and short run situations/causalities in Asian Stock returns.

scholarly journals Asymmetrical Linkages between Foreign Exchange and Stock Markets: Empirical Evidence through Linear and Non-Linear ARDL

2018 ◽  
Vol 11 (3) ◽  
pp. 51 ◽  
Author(s):  
Rabia Luqman ◽  
Rehana Kouser
Keyword(s):  
Time Series Data ◽  
Equity Markets ◽  
Series Data ◽  
Policy Makers ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Non Linear ◽  
Short Run ◽  
Daily Time

The symmetrical relationship between currency and equity markets has gained much attention among academicians and policy makers in the recent era. Many studies conducted on this relationship have concluded that there is short-run relationship between these variables and found less evidence about a long-run relationship. Moreover, all previous studies supposed the linear or symmetrical relationship between these variables. In this study, we use daily time series data from G8+5 countries and Pakistan for 2000–2016 and apply linear and non-linear autoregressive distributed lag (ARDL) to check the symmetrical and asymmetrical relationship between currency and equity markets. Results have shown that there are asymmetrical linkages between the currency and equity markets.

scholarly journals Time–Scale Relationship between Securitized Real Estate and Local Stock Markets: Some Wavelet Evidence

2019 ◽  
Vol 12 (1) ◽  
pp. 16 ◽  
Author(s):  
Kim Hiang Liow ◽  
Xiaoxia Zhou ◽  
Qiang Li ◽  
Yuting Huang
Keyword(s):  
Real Estate ◽  
Stock Market ◽  
Time Scale ◽  
Stock Markets ◽  
Real Estate Markets ◽  
Long Run ◽  
Short Run ◽  
The Relationship ◽  
Local Stock ◽  
Domestic Stock

: This study revisits the relationship between securitized real estate and local stock markets by focusing on their time-scale co-movement and contagion dynamics across five developed countries. Since securitized real estate market is an important capital component of the domestic stock market in the respective economies, it is linked to the stock market. Earlier research does not have satisfactory results, because traditional methods average different relationships over various time and frequency domains between securitized real estate and local stock markets. According to our novel wavelet analysis, the relationship between the two asset markets is time–frequency varying. The average long run real estate–stock correlation fails to outweigh the average short run correlation, indicating the real estate markets examined may have become increasingly less sensitive to the domestic stock markets in the long-run in recent years. Moreover, securitized real estate markets appear to lead stock markets in the short run, whereas stock markets tend to lead securitized real estate markets in the long run, and to a lesser degree medium-term. Finally, we find incomplete real estate and local stock market integration among the five developed economies, given only weaker long-run integration beyond crisis periods.

Contagion Effects on Stock Market of Bangladesh

2017 ◽  
Vol 8 (2) ◽  
pp. 1-14 ◽  
Author(s):  
Mohammad Ashraful Ferdous Chowdhury ◽  
Md. Mahmudul Haque ◽  
Md. Nazrul Islam
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
Impulse Response Function ◽  
Dynamic Relationship ◽  
Contagion Effects ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Due to increased globalization and economic integration in the global economy, contagion effects have been considered an important matter for the investors and policymakers. In the wake of the global financial crisis of September 2008, Islamic financial products were thrust into the spotlight as alternatives to the shaken conventional equity markets. The objective of this study is to discover the Islamic stock market dynamics of Bangladesh with the global Islamic stock markets such as Saudi Arabia, UAE, Kuwait, Europe, UK and Japan. For understanding long run relationship or the theoretical relationships among the Islamic stock market and short run co-movements among Islamic stocks, Johansen co-integration test and Vector Error Correction model (VECM) have been applied respectively. Furthermore, the investigation on short run dynamics is also carried through Impulse Response Function (IRF) analyses. The study found that the Japanese Islamic Stock market is affected to changes in other Islamic stock markets while Kuwait stock market is the leader in the sense it affects other stock market greatly. Bangladeshi Islamic stock market is found to be marginally affecting other stock markets but not as strong as Kuwait. Global Islamic stock market seems to have very little impact to Bangladesh Islamic stock market. The evidence of co-integration and short run dynamics help a diversification benefit may be derived from the cross boarder investment. The empirical evidence of co-integration and short run dynamic relationship found in this study will help investors in making efficient investment decisions and also enhance their understanding of market behavior.

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