The Relationship between Stock and Exchange Rates for BRICS Countries Pre - and Post - Crisis: A Mixed C - VINE Copula Model

Yingying Han and Xiang Zhou
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Xiang Zhou: School of Finance, Zhongnan University of Economics and Law, Wuhan, China.

Journal for Economic Forecasting, 2017, issue 1, 38-59

Abstract: We investigate the relationship between stock and foreign exchange rates for BRICS countries pre- and post- U.S. sub-prime crisis and European sovereign debt crisis. With a wide set of exchange rates, the mixed c-vine copula models are used. The results show the correlations are negative for most of the stock/exchange rate pairs. After the U.S. crisis, the stock markets in BRICS countries have stronger negative dependences and risk hedge ability with the USD and JPY currencies. However, after the European crisis, the changes of the correlations are diverse. The risk hedge effectiveness of stock markets in BRICS countries against foreign currencies decreases. These findings suggest that BRICS countries and investors should pay more attention on the multivariate exchange rates and the flows of cross-border capitals with their influence on the local stock markets after the crisis.

Keywords: crisis; relationship; stock; exchange rate; BRICS; mixed c-vine copula model (search for similar items in EconPapers)
JEL-codes: F31 G01 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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