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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Shyh-Wei Chen & Chun-Wei Chen, 2006. "Testing for Nonlinear Granger Causality in the Price-Volume Relations of Taiwan's Stock and Foreign Exchange Markets," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 2(1), pages 21-51, January.
  • Handle: RePEc:jec:journl:v:2:y:2006:i:1:p:21-51
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    Cited by:

    1. Shyh-Wei Chen, 2008. "Untangling the nexus of stock price and trading volume: evidence from the Chinese stock market," Economics Bulletin, AccessEcon, vol. 7(15), pages 1-16.

    More about this item

    Keywords

    stock market; foreign exchange market; nonlinear Granger causality; heteroscedasticity;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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