Fractional integration and cointegration in stock prices and exchange rates

Marcel Aloy, Mohamed Boutahar, Karine Gente () and Anne Péguin-feissolle ()
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Anne Péguin-feissolle: GREQAM, CNRS, France

Economics Bulletin, 2010, vol. 30, issue 1, 115-129

Abstract: This paper examines the relationships between the CAC40 index, the Dow Jones index and the Euro/USD exchange rate using daily data over the period 1999-2008. We find that these variables are I(1) nonstationary series, but they are fractionally cointegrated: equilibrium errors exhibit slow mean reversion, responding slowly to shocks. Therefore, with regard to the recent empirical cointegration literature, taking into account fractional cointegration techniques appears as a promising way to study the long-run relationships between stock prices and exchange rates.

Keywords: fractional cointegration; long memory; stock prices; exchange rates (search for similar items in EconPapers)
JEL-codes: C3 F3 (search for similar items in EconPapers)
Date: 2010-01-11
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Citations: View citations in EconPapers (2)

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Working Paper: Fractional integration and cointegration in stock prices and exchange rates (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-09-00644

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