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Asymmetric Effect and Dynamic Relationships Between Stock Prices and Exchange Rates Volatility

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  • Wajdi Moussa

    (University of Tunis)

  • Azza Bejaoui

    (University of Tunis)

  • Nidhal Mgadmi

    (University of Tunis)

Abstract

The analysis of time-varying correlation between stock prices and exchange rates in the context of international investments has been well researched in the literature in last few years. In this paper, we study the interdependence of exchange rates and stock prices for seven countries (Canada, Japan, Denmark, Hong Kong, Singapore, Mexico and Brazil). To do so, we both use the DCC-FIEGARCH and FIAPARCH-DCC models during the period spanning from January 1, 2000 until January 1, 2016. The empirical results suggest asymmetric responses in stock prices-exchange rates linkages, a high persistence of the conditional correlation. They also show bidirectional spillovers effects between different series. Moreover, the results indicate different behavior of exchange rates-stock prices nexus during the crisis periods, suggesting the need for specific policy measures. Finally, our findings offer investors, portfolios managers and policymakers insights on international portfolios and monetary.

Suggested Citation

  • Wajdi Moussa & Azza Bejaoui & Nidhal Mgadmi, 2021. "Asymmetric Effect and Dynamic Relationships Between Stock Prices and Exchange Rates Volatility," Annals of Data Science, Springer, vol. 8(4), pages 837-859, December.
    • Handle: RePEc:spr:aodasc:v:8:y:2021:i:4:d:10.1007_s40745-020-00295-9
    DOI: 10.1007/s40745-020-00295-9
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