The dynamic relationship between stock market indexes and foreign exchange

Maria Teresa Garcia () and Ana Catarina Gomes Rodrigues

No 2019/90, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: his empirical study analyses the dynamic relationship between the FTSE100 Index and the EuroSTOXX50 Index and the USD/EUR and USD/GBP exchange rates, from January 2007 to April 2017. The Johansen co-integration tests suggest that these variables have a long-term relationship.The Granger causality test was conducted through the use of VECM equations, showing that the FTSE100 and the EuroSTOXX50 Index both have a causal feedback relationship. A unidirectional relationship was found between the FTSE100 Index stock prices and the USD/EURexchange rate.The presence of a unidirectional relationship between the USD/GBP exchange rate and FTSE100 and EuroSTOXX50 Index stock priceswas also detected.

Keywords: G15; C22; C51; C52 (search for similar items in EconPapers)
Date: 2019-09
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp0902019

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