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Do Foreign Exchange Markets Matter Dor Industry Stock Returns ? An empirical investigation Author info | Abstract | Publisher info | Download info | Related research | Statistics Vincent BODART (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
Paul REDING (Department of Economics, University of Namur, Belgium)
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In this paper, we develop a bivariate two factor-two country GARCH model of stock returns in order to investigate whether exchange rate fluctuations have a significant impact on the conditional mean, variance, and correlation of industry stock returns. Weekly data for seven industries in five European countries over the 1990-1998 period are used. We document that exchange rates have a significant effect on expected industry stock returns and on their volatility. The magnitude of this effect is, however, quite small. The contribution of the exchange rate factor to the time-varying correlation coefficients between two countriesÕindustry returns is also very modest. The paper also shows that the importance of the exchange rate spillovers is influenced by the exchange rate regime, the magnitude and the direction of exchange rate shocks.
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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number
2001016.
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Length: 36
Date of creation: 01 Apr 2001Date of revision:
Handle: RePEc:ctl:louvir:2001016Contact details of provider: Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium) Fax: +32 10473945 Email: Web page: http://www.uclouvain.be/econ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Anne DAVISTER).
Keywords: Industry stock returns ; Fx market ; Volatility ; International correlation ; Other versions of this item:
Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions F31 - International Economics - - International Finance - - - Foreign Exchange F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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