International Investors, Exchange Rates and Equity Prices

Dirk G Baur and Isaac Miyakawa

No 178, Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney

Abstract: The correlation between equity returns and currency returns affects the risk of international equity portfolios. We analyze the equity index and currency returns of 53 countries and find that correlations are mainly positive. Negative correlations are found for currencies which play a special role in the global financial system like the US dollar, the Japanese yen, the British pound, the euro and the Swiss franc. Correlations generally increased in recent years and are often larger in extreme equity market conditions. In addition, empirical evidence for an equilibrium relationship between equity returns and currency returns - Uncovered Equity Parity - is only found for a small group of countries. For the majority of countries exchange rates increase the risk of international equity portfolios.

Keywords: exchange rates; equity-currency correlation; international investors; Uncovered Equity Parity (search for similar items in EconPapers)
JEL-codes: F23 F31 G15 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2013-12-01
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.finance.uts.edu.au/research/wpapers/wp178.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.finance.uts.edu.au:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
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:uts:wpaper:178

Access Statistics for this paper

More papers in Working Paper Series from Finance Discipline Group, UTS Business School, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC.
Bibliographic data for series maintained by Duncan Ford ().