Correlation Dynamics in East Asian Financial Markets

Lestano Lestano and Gerard Kuper

Emerging Markets Finance and Trade, 2016, vol. 52, issue 2, 382-399

Abstract: We examine the dynamic relationship between stock returns and exchange rate changes using daily data from January 1994 to September 2013 for six East Asian countries. We use the multivariate GARCH-DCC model in order to disclose the relationship between stock markets and foreign exchange markets which is important for understanding financial stability. The estimation results reveal time varying correlations in the pre- and post-Asian crisis and the Global Financial Crisis periods for all countries. The correlations are stronger when the crisis intensifies. The degree of interdependence between both markets reflects a mutual markets response to shocks and changes in policy.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:52:y:2016:i:2:p:382-399

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DOI: 10.1080/1540496X.2014.998560

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