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The dynamic relationship between stock index and exchange rate: Evidence for Tunis

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  • Moussa Wajdi

Abstract

The analysis of time varying correlation between stock index and exchange rates in the context of international investments was been well researched in the literature in last few years. In this paper, we study the interdependence of stock index and exchange rate for the Tunis during the global financial crisis. Hence, we approve a DCC-FIAPARCH model to study the dynamic conditional correlation, throughout the period spanning from January 1, 2006 until January 1, 2017. The empirical results recommend asymmetric responses in correlations between the stock index and exchange rate from Tunisia. Moreover, the results indicate an increase of exchange rates and stock index correlations through the crisis periods, telling the different currencies vulnerability. Finally, we find some significant decreases in the estimated dynamic correlations, indicating the existence of a “currency contagion effect†during turmoil periods.JEL classification numbers: G32, G33, C22, C53, G15.Keywords: volatility, DCC-FIAPARCH, Global financial crisis, exchange rates, stock index and currency contagion.

Suggested Citation

  • Moussa Wajdi, 2019. "The dynamic relationship between stock index and exchange rate: Evidence for Tunis," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 8(1), pages 1-4.
    • Handle: RePEc:spt:fininv:v:8:y:2019:i:1:f:8_1_4
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    More about this item

    Keywords

    volatility; dcc-fiaparch; global financial crisis; exchange rates; stock index and currency contagion.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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