Exchange rates and the global transmission of equity market shocks

Javier Ojea-Ferreiro () and Juan Reboredo
Additional contact information
Javier Ojea-Ferreiro: European Commission, https://ec.europa.eu/jrc/en
Authors registered in the RePEc Author Service: Javier Ojea Ferreiro

No 2021-05, JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission

Abstract: We assess the role played by exchange rates in buffering or amplifying the propagation of shocks across international equity markets. Using copula functions we model the joint dependence between exchange rates and two global equity markets and, from a copula framework, we obtain the conditional expectation and measure the exchange rate contribution to shock propagation between those equity markets. Our estimates for emerging Latin American economies (Argentina, Brazil, Chile and Mexico) and two developed markets (Europe and the USA) document the following: (a) the contribution of exchange rates to the transmission of equity shocks is time varying and asymmetric and differs across countries; and (b) exchange rates diversify shocks from abroad for investors based in emerging economies (particularly Brazil, Chile and Mexico) and echo the effect of shocks from abroad for investors based in developed markets. This evidence has implications for international investors in terms of portfolio and risk management decisions.

Keywords: Exchange rates; International equity markets; Copulas; Expected shortfall (search for similar items in EconPapers)
JEL-codes: C58 F31 G15 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2021-04
New Economics Papers: this item is included in nep-ifn, nep-opm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://joint-research-centre.ec.europa.eu/publica ... ity-market-shocks_en
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Exchange rates and the global transmission of equity market shocks (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jrs:wpaper:202105

Access Statistics for this paper

More papers in JRC Working Papers in Economics and Finance from Joint Research Centre, European Commission Contact information at EDIRC.
Bibliographic data for series maintained by Peter Benczur ().