Asymmetric Effect and Dynamic Relationships Between Stock Prices and Exchange Rates Volatility

Wajdi Moussa (), Azza Bejaoui and Nidhal Mgadmi
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Wajdi Moussa: University of Tunis
Azza Bejaoui: University of Tunis
Nidhal Mgadmi: University of Tunis

Annals of Data Science, 2021, vol. 8, issue 4, No 10, 837-859

Abstract: Abstract The analysis of time-varying correlation between stock prices and exchange rates in the context of international investments has been well researched in the literature in last few years. In this paper, we study the interdependence of exchange rates and stock prices for seven countries (Canada, Japan, Denmark, Hong Kong, Singapore, Mexico and Brazil). To do so, we both use the DCC-FIEGARCH and FIAPARCH-DCC models during the period spanning from January 1, 2000 until January 1, 2016. The empirical results suggest asymmetric responses in stock prices-exchange rates linkages, a high persistence of the conditional correlation. They also show bidirectional spillovers effects between different series. Moreover, the results indicate different behavior of exchange rates-stock prices nexus during the crisis periods, suggesting the need for specific policy measures. Finally, our findings offer investors, portfolios managers and policymakers insights on international portfolios and monetary.

Keywords: Dynamic conditional correlation; Contagion effect; Asymmetries; Long memory (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40745-020-00295-9

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