Causal Relationship between Stock Prices and Exchange Rates

Imhotep Alagidede (), Theodore Panagiotidis and Xu Zhang ()
Additional contact information
Xu Zhang: Guosen Research Institute, http://www.guosen.com.cn/about/en/index.html

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: This paper investigates the nature of the causal linkage between stock markets and foreign exchange markets in Australia, Canada, Japan, Switzerland, and UK from 1992:1 to 2005:12. Recently developed cointegration tests are employed and no evidence of a long-run relationship between the variables is found. Three variations of the Granger causality test are carried out and causality from exchange rates to stock prices is found for Canada, Switzerland, and United Kingdom; weak causality in the other direction is found only for Switzerland. The Hiemstra-Jones test is used to examine possible nonlinear causality and the results indicate causality from stock prices to exchange rates in Japan and weak causality of the reverse direction in Switzerland.

Keywords: Granger Causality; Stock Prices; Exchange Rates, Hiemstra-Jones Test, Nonparametric Causality. (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Date: 2010-01, Revised 2010-01
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Causal relationship between stock prices and exchange rates (2011)
Working Paper: Causal Relationship between Stock Prices and Exchange Rates (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2010_01

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