Do forward exchange rate conditions intervene with the transmission of stock market volatility and COVID-19 impact? Sign and location-based asymmetries

Mosab I. Tabash, Umaid A. Sheikh, David Roubaud, Emilios Galariotis and Oksana Grebinevych

Research in International Business and Finance, 2025, vol. 77, issue PB

Abstract: This study is the first to estimate the differential impact of bearish, bullish, and moderate quantiles of stock market volatility (SV) and COVID-19 case counts on the forward exchange rates (FERs) in South Asia—specifically, those of Pakistan, India, Sri-Lanka, and Bangladesh over 3-, 6-, 9-, and 12-month periods using an augmented QARDL model. Prior research has focused on the portfolio balance effect in transmitting financial market shocks to spot-based foreign exchange markets, largely overlooking the role of SV and FERs across different quantiles and investment horizons (short- and long-term). The findings confirm the presence of both sign- and location-based asymmetries in the transmission process of shocks from SV to FERs. For South Asian businesses involved in international trade, it is essential to consider these varying short- and long-term effects of stock market volatility across quantiles of FERs. This understanding underscores the need for a more nuanced investment approach and is vital for making informed decisions regarding hedging strategies, pricing, and the management of currency risk in cross-border transactions.

Keywords: Forward exchange rates; Stock market volatility; QARDL model; Portfolio balance approach; Sign-based asymmetries; Location-based asymmetries; COVID-19 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531925001850
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pb:s0275531925001850

DOI: 10.1016/j.ribaf.2025.102929

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().