Work

Dynamic heterogeneous panel analysis of the correlation between stock prices and exchange rates

Year: 2015

Type: article

Abstract: This article uses quarterly data from 29 countries, during the period from the first quarter of 2000 to the second quarter of 2011, and the Pooled Mean Group (PMG) method to estimate the dynamic heterogeneous panel data model and to verify the correlation between stock prices and exchange rates. According to empirical results, the stock market and the foreign exchange market have a long-run co-integration relationship. In the short-run, the stock market and the foreign exchange market are negatively correlated, supporting the viewpoints of the portfolio approach. However, using the error-correction adjustment process, the long-run relationship between the two is positive, supporting the results of the traditional approach. This study suggests that the viewpoints of both the portfolio approach and the traditional approach can co-exist through long- and short-run adjustments.

Source: Economic Research-Ekonomska Istraživanja

DOI: 10.1080/1331677x.2015.1084889

Authors: Yuan-Ming Lee, Kuan-Min Wang

Institutions: Southern Taiwan University of Science and Technology, Overseas Chinese University

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $944

Funder: National Science Council