Return-volatility linkages in the international equity and currency markets

Bill B. Francis, Iftekhar Hasan and Delroy M. Hunter

No 9/2002, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: This paper, which is motivated by the literature on international asset pricing and recent work on exchange rate determination, investigates dynamic relationships between major currency and equity markets.Using a multivariate GARCH framework, we examine conditional cross-autocorrelations between pairs of national equity markets and related exchange rates.This provides a parsimonious way of testing mean-volatility relationships in currency and equity markets and re-examining the robustness of relationships between equity markets, while controlling for exchange rate effects.We find that the relationship between currency and equity markets is bi-directional, significant, persistent, and independent of the relationship strictly between equity markets, and that it is better captured by the conditional second moments

Keywords: international asset pricing; exchange rate determination; equity markets; relationships between currency and equity markets (search for similar items in EconPapers)
JEL-codes: F31 G12 G14 G15 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Return-volatility linkages in the international equity and currency markets (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2002_009

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