The Relation between National Stock Prices and Effective Exchange Rates: Does It Affect Exchange Rate Exposure?

Marko Korhonen

Global Economy Journal (GEJ), 2015, vol. 15, issue 2, 241-256

Abstract: There is twofold contribution in this paper. First, by using monthly data for 16 industrialized countries for the period 1973–2011 we find evidence of time-varying cointegration relationship between effective exchange rates and national stock market indices. Second, we present that the cointegration relationship affects exchange rate exposure. We propose that the exchange rate exposure effect changes when the connection between the exchange rate and stock market emerges. This is a new result and reflects importance of these markets’ joint role in international risk sharing.

Keywords: exchange rate exposure; stock market returns; ARDL; cointegration; threshold (search for similar items in EconPapers)
Date: 2015
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Journal Article: The Relation between National Stock Prices and Effective Exchange Rates: Does It Affect Exchange Rate Exposure? (2015)
Working Paper: The relation between national stock prices and effective exchange rates: Does it affect exchange rate exposure? (2014)
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DOI: 10.1515/GEJ-2014-0057

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