Fractional integration and cointegration in stock prices and exchange rates

Marcel Aloy, Mohamed Boutahar, Karine Gente () and Anne Peguin-Feissolle ()
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Anne Peguin-Feissolle: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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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)
Date: 2010
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00536140
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Citations: View citations in EconPapers (2)

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Journal Article: Fractional integration and cointegration in stock prices and exchange rates (2010)
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