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Testing for Nonlinear Granger Causality in the Price-Volume Relations of Taiwan's Stock and Foreign Exchange Markets

Listed author(s):
  • Shyh-Wei Chen

    (Department of Economics, Tunghai University, Taiwan)

  • Chun-Wei Chen

    (Department of Economics and Graduate Institute of International Economics, National Chung Cheng University, Taiwan)

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    This paper investigates the price-volume relationships of Taiwan's stock and foreign exchange markets. We first adopt the traditional linear Granger causality test to achieve this goal. In addition, the nonlinearity feature is also taken into account. We employ the nonlinear Granger causality test, championed by Hiemstra and Jones (1994), to detect the nonlinear relationships among stock and foreign exchange markets. The empirical results show that there do exist nonlinear price-volume relationships in Taiwan's stock and foreign exchange markets. The conditional heteroscedasticity feature plays an important role in this nonlinear relationship.

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    Article provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.

    Volume (Year): 2 (2006)
    Issue (Month): 1 (January)
    Pages: 21-51

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    Handle: RePEc:jec:journl:v:2:y:2006:i:1:p:21-51
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