The dependence structure between the Canadian stock market and the USD/CAD exchange rate: a copula approach

Leo Michelis and Cathy Ning

Canadian Journal of Economics, 2010, vol. 43, issue 3, 1016-1039

Abstract: This paper investigates the dependence structure between the real Canadian stock returns and the real USD/CAD exchange rate returns, using the Symmetrized Joe-Clayton (SJC) copula function. We estimate the SJC copula with monthly data over the period 1995:1 to 2006:12. Our results show significant asymmetric static and dynamic tail dependence between the real stock returns and the real exchange rate returns, such that the two returns are more dependent in the left than in the right tail of their joint distribution. We explain this asymmetric dependence in terms of an asymmetric interest rate policy by Canadian monetary authorities in response to changes in the real exchange rate during sub-periods of falling and rising commodity prices.

JEL-codes: C32 C51 F31 G15 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
https://doi.org/10.1111/j.1540-5982.2010.01604.x (text/html)
access restricted to subscribers

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:cje:issued:v:43:y:2010:i:3:p:1016-1039

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Zhiqi Chen

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().