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The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach

  • Tsai, I-Chun
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    This paper uses the data of six Asian countries to estimate the relationship between stock price index and exchange rate. According to the portfolio balance effect, these two variables should be negatively related. However, since the evidence from traditional ordinary least squares estimation is not favorable, the quantile regression model is adopted to observe the various relationships between stock and foreign exchange markets. The results show an interesting pattern in the relation of these two markets in Asia, which indicates that the negative relation between stock and foreign exchange markets is more obvious when exchange rates are extremely high or low.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1042443112000297
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    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 22 (2012)
    Issue (Month): 3 ()
    Pages: 609-621

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    Handle: RePEc:eee:intfin:v:22:y:2012:i:3:p:609-621
    Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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    8. Kim, Ki-ho, 2003. "Dollar exchange rate and stock price: evidence from multivariate cointegration and error correction model," Review of Financial Economics, Elsevier, vol. 12(3), pages 301-313.
    9. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
    10. Mansor H. Ibrahim & Hassanuddeen Aziz, 2003. "Macroeconomic variables and the Malaysian equity market: A view through rolling subsamples," Journal of Economic Studies, Emerald Group Publishing, vol. 30(1), pages 6-27, January.
    11. Hatemi-J, Abdulnasser & Irandoust, Manuchehr, 2002. "On the Causality between Exchange Rates and Stock Prices: A Note," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 197-203, April.
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