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Price and Volatility Spillovers between Stock Prices and Exchange Rates: Empirical Evidence from the G-7 Countries

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  • Sheng-Yung Yang

    (Department of Finance, National Chung Hsing University, Taiwan)

  • Shuh-Chyi Doong

    (Department of Finance, National Chung Hsing University, Taiwan)

Abstract

This paper explores the nature of the mean and volatility transmission mechanism between stock and foreign exchange markets for the G-7 countries. Empirical evidence supports the asymmetric volatility spillover effect and shows that movements of stock prices will affect future exchange rate movements, but changes in exchange rates have less direct impact on future changes of stock prices. The implication is particularly important to international portfolio managers when devising hedging and diversification strategies for their portfolios.

Suggested Citation

  • Sheng-Yung Yang & Shuh-Chyi Doong, 2004. "Price and Volatility Spillovers between Stock Prices and Exchange Rates: Empirical Evidence from the G-7 Countries," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 3(2), pages 139-153, August.
    • Handle: RePEc:ijb:journl:v:3:y:2004:i:2:p:139-153
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    References listed on IDEAS

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    More about this item

    Keywords

    exchange rate; stock price; bivariate EGARCH model; asymmetric volatility spillover;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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