The Granger Causality Study Between Exchange Rate And Stock Prices In The Indian Context

2019 ◽  
Author(s):  
Amarthya Prem Rajamalla ◽  
Kushal Kumar Reddy
Keyword(s):  
Exchange Rate ◽  
Granger Causality ◽  
Stock Prices ◽  
Indian Context

Stock prices, exchange rate and interest rate: evidence beyond symmetry

2017 ◽  
Vol 9 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Taufeeq Ajaz ◽  
Md Zulquar Nain ◽  
Bandi Kamaiah ◽  
Naresh Kumar Sharma
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Prices ◽  
Asset Price ◽  
Asymmetric Reaction ◽  
Monetary Policies ◽  
Content Type ◽  
Financial Variables ◽  
Distributed Lag ◽  
Indian Context

Purpose This paper aims to examine the dynamic interactions between monetary and financial variables in the Indian context. Design/methodology/approach In this paper, the authors have applied a recently developed asymmetric autoregressive distributed lag (ARDL) model by Shin et al. (2014), for detecting nonlinearities focusing on the long-run and short-run asymmetries among economic variables. Findings The results point toward the presence of asymmetric reaction of stock prices to changes in interest rate and exchange rate in full sample, as well as in pre-crisis. However, no asymmetry was found in the post-crisis period. The results further suggest that tight monetary policies appear to retard the stock prices, more than easy monetary policies that stimulate them. Practical implications The findings of the study can be helpful in understanding the policy transmission mechanism through asset price channel. Originality/value To the best of the authors’ knowledge, this is the first study that examines the interactions between monetary and financial variables in the Indian context in an asymmetric framework. The findings of this study are quite interesting and are different from several existing studies in the literature.

The Relationship Between Stock Prices and Exchange Rates

2017 ◽  
pp. 171-185 ◽  
Author(s):  
Oguzhan Aydemir ◽  
Banu Demirhan
Keyword(s):  
Saudi Arabia ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Granger Causality ◽  
Stock Prices ◽  
Causality Analysis ◽  
Mena Countries ◽  
Local Currency ◽  
Panel Granger Causality ◽  
The Relationship

The relationship and causality between stock prices and exchange rates has preoccupied the minds of economists, investors and policy makers for a long time. However, the relationship or the direction of causality between these two variables still remains unresolved in both theory and empirics. This study examines panel Granger causality relationship between stock price and exchange rate for selected six MENA countries (Bahrain, Lebanon, Morocco, Pakistan, Qatar, and Saudi Arabia) over the period of 2005:01 and 2013:12. Panel DOLS and FMOLS methods are used to estimate long-run coefficients. On the other hand, panel based error-correction model is used to perform causality analysis. The findings of FMOLS and DOLS methods indicate that the appreciation of local currency in Bahrain, Lebanon, Morocco, Pakistan and Qatar leads to a reduction in stock prices. Contrary, in Saudi Arabia, the appreciation of local currency increases stock prices. Panel Granger causality analysis shows that there is a unidirectional causality from exchange rate to stock prices in MENA countries.

scholarly journals Stock prices and economic activity nexus in OECD countries: new evidence from an asymmetric panel Granger causality test in the frequency domain

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Veli Yilanci ◽  
Onder Ozgur ◽  
Muhammed Sehid Gorus
Keyword(s):  
Frequency Domain ◽  
Granger Causality ◽  
Stock Prices ◽  
Economic Activity ◽  
Stock Price ◽  
Predictive Power ◽  
Oecd Countries ◽  
Causality Test ◽  
Asymmetric Shocks ◽  
Panel Granger Causality

AbstractThis study investigates the stock price–economic activity nexus in 12 member countries of the Organization for Economic Cooperation and Development (OECD) by employing monthly data over the period 1981:1–2018:3. For this purpose, the study uses Granger causality in the frequency domain in the panel setting by decomposing the symmetric and asymmetric fluctuations. This methodology determines whether the predictive power of interested variables is concentrated on quickly, moderately, or slowly fluctuating components. Our findings show that the stock prices have predictive power for future long-term economic activity in the panel setting. However, economic activity has more reliable information for stock prices for negative components. Additionally, empirical findings for asymmetric shocks are not fully consistent with those of symmetric ones. Besides, the country-specific results provide different causal linkages across members and frequencies. These findings may provide valuable information for policymakers to design proper and effective policies in OECD countries regarding the stock market and economic activity nexus.

العلاقة التبادلية بين سعر الصرف وأسعار الأسهم دراسة تطبيقية في سوق اسطنبول للأوراق المالية للمدة 2005-2020

2021 ◽  
Vol 1 (1) ◽  
Author(s):  
سعدالله ألنعيمي
Keyword(s):  
Exchange Rate ◽  
Stock Prices ◽  
Negative Impact ◽  
Reciprocal Relationship ◽  
Nominal Exchange Rate ◽  
Share Price ◽  
Theoretical Interpretation ◽  
Short Term ◽  
The Exchange Rate

The study aims to analyzing the reciprocal relationship between the nominal exchange rate of the Turkish lira versus the U.S. dollar and the stock prices of the companies listed on the Istanbul Stock Exchange (ISE) expressed in the general market index for the period from 2005 to 2020 with 192 monthly observations, based on the traditional theory and the theory of portfolio balance model in theoretical interpretation for that relationship, aiming to identify the effect of the exchange rate on stock prices, as well as to analyze the causal relationship between those variables and to identify which of them is the cause or which is the result, using the Autoregressive Distributed Lag (ARDL) model. The research found that the exchange rate has a positive effect on stock prices in the long term, despite the emergence of the negative impact in the short term, but the long-term relationship has corrected the course of the short-term relationship with a time period not exceeding one month, in addition to proving that this relationship takes one direction. From the exchange rate towards stock prices, that is, the exchange rate is the reason and stock prices are the result, therefore the results of this research helps investors to predict future trends of stock prices depending on the exchange rate changes, and it also enables the companies, especially those with foreign transactions, to manage price risks the exchange rate in order to avoid its negative impact on its share price, as it represents an obstacle to achieving its main goal of maximizing the share price

MODELING THE INTERACTIONS OF STOCK PRICE AND EXCHANGE RATE IN MALAYSIA

2009 ◽  
Vol 54 (04) ◽  
pp. 605-619 ◽  
Author(s):  
MOHD TAHIR ISMAIL ◽  
ZAIDI BIN ISA
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Stock Prices ◽  
Stock Price ◽  
Price Index ◽  
Composite Index ◽  
Regime Shifts ◽  
Var Model ◽  
Vector Autoregressive ◽  
Stock Price Index

After the East Asian crisis in 1997, the issue of whether stock prices and exchange rates are related or not have received much attention. This is due to realization that during the crisis the countries affected saw turmoil in both their currencies and stock markets. This paper studies the non-linear interactions between stock price and exchange rate in Malaysia using a two regimes multivariate Markov switching vector autoregression (MS-VAR) model with regime shifts in both the mean and the variance. In the study, the Kuala Lumpur Composite Index (KLCI) and the exchange rates of Malaysia ringgit against four other countries namely the Singapore dollar, the Japanese yen, the British pound sterling and the Australian dollar between 1990 and 2005 are used. The empirical results show that all the series are not cointegrated but the MS-VAR model with two regimes manage to detect common regime shifts behavior in all the series. The estimated MS-VAR model reveals that as the stock price index falls the exchange rates depreciate and when the stock price index gains the exchange rates appreciate. In addition, the MS-VAR model fitted the data better than the linear vector autoregressive model (VAR).

scholarly journals The Role of Exchange Rates in the Stock Price Development of Chemical Companies in the Visegrad Four Countries

2019 ◽  
Vol 22 (3) ◽  
pp. 117-129
Author(s):  
Jana Šimáková ◽  
Nikola Rusková
Keyword(s):  
Exchange Rate ◽  
Pharmaceutical Industry ◽  
Exchange Rates ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchanges ◽  
The Exchange Rate ◽  
Chemical Companies ◽  
The Empirical Analysis

The aim of the paper is to evaluate the effect of exchange rates on the stock prices of companies in the chemical industry listed on the stock exchanges in the Visegrad Four countries. The empirical analysis was performed from September 2003 to June 2016 on companies from the petrochemical and pharmaceutical industry. The effect of the exchange rate on stock prices is analyzed using Jorion’s approach on monthly data. In contrast to the selected petrochemical companies, the pharmaceutical companies did not use any hedging instruments in the tested period. The effect of the exchange rate on the stock price was proved only in the case of companies from the pharmaceutical industry. This suggests that exchange rate risk could be eliminated by using hedging instruments.

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