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Price and Volatility Spillovers between Stock Prices and Exchange Rates: Empirical Evidence from the G-7 Countries

Sheng-Yung Yang () and Shuh-Chyi Doong ()

International Journal of Business and Economics, 2004, vol. 3, issue 2, 139-153

Abstract: This paper explores the nature of the mean and volatility transmission mechanism between stock and foreign exchange markets for the G-7 countries. Empirical evidence supports the asymmetric volatility spillover effect and shows that movements of stock prices will affect future exchange rate movements, but changes in exchange rates have less direct impact on future changes of stock prices. The implication is particularly important to international portfolio managers when devising hedging and diversification strategies for their portfolios.

Keywords: exchange rate; stock price; bivariate EGARCH model; asymmetric volatility spillover (search for similar items in EconPapers)
JEL-codes: C22 F31 G12 (search for similar items in EconPapers)
Date: 2004
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International Journal of Business and Economics is currently edited by Kun-Huang Huarng (Editor-in-Chief), Domingo Ribeiro Soriano (Associate Editor), Feng-Jyh Lin (Associate Editor) and Fang-Yi Lo (Managing Editor)

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