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Return-volatility linkages in the international equity and currency markets

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Author Info

  • Bill B. Francis

    (University of South Florida - College of Business Administration)

  • Iftekhar Hasan

    (Rensselaer Polytechnic Institute - Accounting, Finance & Economics)

  • Delroy M. Hunter

    (University of South Florida - College of Business Administration)

Abstract

This paper, which is motivated by the literature on international asset pricing and recent work on exchange rate determination, investigates dynamic relationshiops between major currency and equity markets. Using a multivariate GARCH framework, we examine conditional cross- autocorrelations between pairs of national equity markets and related exchange rates. This provides a parsimonious way of testing mean- volatility relationships in currency and equity markets and re-examining the robustness of relationships between equity markets, while controlling for exchange rate effects. We find that the relationship between currency and equity markets is bi-directional, significant, persistent, and independent of the relationship strictly between equity markets, and that it is better captured by the conditional second moments

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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0405022.

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Date of creation: 18 May 2004
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Handle: RePEc:wpa:wuwpfi:0405022

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Web page: http://128.118.178.162

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Keywords: international asset pricing; exchange rate determination; equity markets; relationships between currency and equity markets;

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References

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Citations

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Cited by:
  1. Sinha, Pankaj & Sinha, Gyanesh, 2010. "Volatility Spillover in India, USA and Japan Investigation of Recession Effects," MPRA Paper 47190, University Library of Munich, Germany, revised 17 May 2013.
  2. Karlo Kauko, 2004. "Links between securities settlement systems: An oligopoly theoretic approach," Industrial Organization 0405003, EconWPA.
  3. Keloharju, Matti & Malkamäki, Markku & Nyborg, Kjell G. & Rydqvist, Kristian, 2002. "A descriptive analysis of the Finnish treasury bond market 1991–1999," Research Discussion Papers 16/2002, Bank of Finland.
  4. Flavin, Thomas J., 2004. "The effect of the Euro on country versus industry portfolio diversification," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1137-1158.
  5. Peik Granlund, 2004. "Bank exit legislation in US, EU and Japanese financial centres," Finance 0405015, EconWPA.
  6. Andreou, Elena & Matsi, Maria & Savvides, Andreas, 2013. "Stock and foreign exchange market linkages in emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 248-268.
  7. Mikko Niskanen, 2004. "Lender of last resort and the moral hazard problem," Macroeconomics 0405016, EconWPA.
  8. Maher Asal, 2011. "The Impact of Euro on Sectoral Equity Returns and Portfolio Risk," International Advances in Economic Research, Springer, vol. 17(2), pages 119-133, May.

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