IDEAS home Printed from https://ideas.repec.org/a/jfr/afr111/v5y2016i2p104.html
   My bibliography  Save this article

Analysis of the Correlation Structure between Stock and Exchange Rate Markets: An Example of China on Asian emerging Markets

Author

Listed:
  • Ming-Chieh Wang
  • Sook-Hui Lee

Abstract

This study investigates the dynamic correlation between stock and exchange rate markets to examine the influences of China stock and exchange rate movements on other Asian emerging countries. We employ the GARCH model, which allows for the conditional correlation structure to be time-varying, to explore the return and volatility transmission mechanism between stock and exchange rate markets among these countries. Our results demonstrate that the China stock market has a greater positive impact on other Asian stock markets. We also find that the exchange rate movements of China have a positive effect upon the exchange rate markets of Singapore, South Korea, and Taiwan, but have no significant influence on the other countries. The test of volatility spillover shows that stock market movements do not affect exchange rate markets, which is a result that does not support Phylaktis and Ravazzolo (2005)’s evidence that stock market movements influence the exchange rate dynamics.

Suggested Citation

  • Ming-Chieh Wang & Sook-Hui Lee, 2016. "Analysis of the Correlation Structure between Stock and Exchange Rate Markets: An Example of China on Asian emerging Markets," Accounting and Finance Research, Sciedu Press, vol. 5(2), pages 104-104, May.
    • Handle: RePEc:jfr:afr111:v:5:y:2016:i:2:p:104
    as

    Download full text from publisher

    File URL: https://www.sciedupress.com/journal/index.php/afr/article/download/9516/5760
    Download Restriction: no
    File URL: https://www.sciedupress.com/journal/index.php/afr/article/view/9516
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zhao, Hua, 2010. "Dynamic relationship between exchange rate and stock price: Evidence from China," Research in International Business and Finance, Elsevier, vol. 24(2), pages 103-112, June.
    2. Moore, Tomoe & Wang, Ping, 2014. "Dynamic linkage between real exchange rates and stock prices: Evidence from developed and emerging Asian markets," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 1-11.
    3. Alan G. Ahearne & John G. Fernald & Prakash Loungani & John W. Schindler, 2003. "China and emerging Asia: comrades or competitors?," Working Paper Series WP-03-27, Federal Reserve Bank of Chicago.
    4. Pan, Ming-Shiun & Fok, Robert Chi-Wing & Liu, Y. Angela, 2007. "Dynamic linkages between exchange rates and stock prices: Evidence from East Asian markets," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 503-520.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wong, Hock Tsen, 2017. "Real exchange rate returns and real stock price returns," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 340-352.
    2. Hock Tsen Wong, 2016. "Real Exchange Rate Returns And Real Stock Price Returns In The Stock Market Of Malaysia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1319-1349, December.
    3. Christos Kollias & Stephanos Papadamou & Costas Siriopoulos, 2016. "Stock markets and effective exchange rates in European countries: threshold cointegration findings," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 215-274, August.
    4. Athanasios Koulakiotis & Apostolis Kiohos & Vassilios Babalos, 2015. "Exploring the interaction between stock price index and exchange rates: an asymmetric threshold approach," Applied Economics, Taylor & Francis Journals, vol. 47(13), pages 1273-1285, March.
    5. Dai, Zhifeng & Zhu, Huan & Dong, Xiaodi, 2020. "Forecasting Chinese industry return volatilities with RMB/USD exchange rate," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 539(C).
    6. Oguzhan Ozcelebi & Nurtac Yildirim, 2017. "Impacts of short-term interest rates on stock returns and exchange rates: Empirical evidence from EAGLE countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(2), pages 228-255, February.
    7. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2020. "The foreign exchange and stock market nexus: New international evidence," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 240-266.
    8. Mohsen Bahmani-Oskooee & Sujata Saha, 2018. "On the relation between exchange rates and stock prices: a non-linear ARDL approach and asymmetry analysis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(1), pages 112-137, January.
    9. Rabia Luqman & Rehana Kouser, 2018. "Asymmetrical Linkages between Foreign Exchange and Stock Markets: Empirical Evidence through Linear and Non-Linear ARDL," JRFM, MDPI, vol. 11(3), pages 1-13, August.
    10. Tian, Maoxi & El Khoury, Rim & Alshater, Muneer M., 2023. "The nonlinear and negative tail dependence and risk spillovers between foreign exchange and stock markets in emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).
    11. Andrew Phiri, 2020. "Structural changes in exchange rate-stock returns dynamics in South Africa: examining the role of crisis and new trading platform," Economic Change and Restructuring, Springer, vol. 53(1), pages 171-193, February.
    12. Ngo Thai Hung, 2022. "Spillover Effects Between Stock Prices and Exchange Rates for the Central and Eastern European Countries," Global Business Review, International Management Institute, vol. 23(2), pages 259-286, April.
    13. Irena Vodenska & Alexander P. Becker & Di Zhou & Dror Y. Kenett & H. Eugene Stanley & Shlomo Havlin, 2016. "Community Analysis of Global Financial Markets," Risks, MDPI, vol. 4(2), pages 1-15, May.
    14. Tshikalange, Mulanga & Bonga-Bonga, Lumengo, 2023. "The determinants of the dynamic correlation between foreign exchange and equity markets: Cross-Country comparisons," MPRA Paper 118401, University Library of Munich, Germany.
    15. Muhammad Aftab & Abid Ali & Scott W. Hegerty, 2021. "Foreign exchange market pressure and stock market dynamics in emerging Asia," International Economics and Economic Policy, Springer, vol. 18(4), pages 699-719, October.
    16. Salisu, Afees A. & Ndako, Umar B., 2018. "Modelling stock price–exchange rate nexus in OECD countries: A new perspective," Economic Modelling, Elsevier, vol. 74(C), pages 105-123.
    17. Lateef O. Akanni & Kazeem Isah, 2018. "Exchange Rate Movements on Sectoral Stock Prices of Nigerian Firms: Is there Evidence of Asymmetry?," Working Papers 046, Centre for Econometric and Allied Research, University of Ibadan.
    18. Mohsen Bahmani-Oskooee & Sujata Saha, 2019. "On the effects of policy uncertainty on stock prices," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(4), pages 764-778, October.
    19. Sui, Lu & Sun, Lijuan, 2016. "Spillover effects between exchange rates and stock prices: Evidence from BRICS around the recent global financial crisis," Research in International Business and Finance, Elsevier, vol. 36(C), pages 459-471.
    20. Neha Seth & Laxmidhar Panda, 2020. "Time-varying Correlation Between Indian Equity Market and Selected Asian and US Stock Markets," Global Business Review, International Management Institute, vol. 21(6), pages 1354-1375, December.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jfr:afr111:v:5:y:2016:i:2:p:104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sciedu Press (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.