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Exchange rate determination and equity prices: Evidence from the UK

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  • Litsios, Ioannis

Abstract

This paper develops a model of optimal choice over an array of different assets, including domestic and foreign bonds, domestic and foreign equities, and domestic and foreign real money balances, with a view to examine whether stock markets have an effect on the exchange rate in the long-run. The model is tested using data from the UK and the USA. Evidence suggests that the UK stock market has a significant effect on the value of the pound's sterling nominal effective exchange rate in the long-run over the period 1982 to 2011.

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  • Litsios, Ioannis, 2013. "Exchange rate determination and equity prices: Evidence from the UK," The Journal of Economic Asymmetries, Elsevier, vol. 10(2), pages 115-128.
    • Handle: RePEc:eee:joecas:v:10:y:2013:i:2:p:115-128
    DOI: 10.1016/j.jeca.2014.01.002
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    3. Arash Habibi & Chin Lee, 2019. "Asymmetric Effects of Exchange Rates on Stock Prices in G7 Countries," Capital Markets Review, Malaysian Finance Association, vol. 27(1), pages 19-33.

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