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The Dynamic Linkages between Exchange Rates and Stock Prices: Evidence from Emerging Markets

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  • Usman M. Umer
  • Güven Sevil
  • Serap KamiÅŸli

Abstract

This paper investigates the dynamic relationship between stock prices and exchange rates for nine emerging markets using Autoregressive Distributed Lag (ARDL) and causality models from January 1998 to May 2014. The sample period subdivided in to two episodes to take in to account the interaction of these series during the tranquil and crisis periods. The findings indicates that the comovement between exchange rates and stock prices become stronger during the crises time, and the direction of causality originates from stock prices to exchange rates during the tranquil period; and from exchange rates to stock prices during crisis once. The result shows certain sensitivity to the level of stability in financial markets.

Suggested Citation

  • Usman M. Umer & Güven Sevil & Serap KamiÅŸli, 2015. "The Dynamic Linkages between Exchange Rates and Stock Prices: Evidence from Emerging Markets," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 4(3), pages 1-2.
    • Handle: RePEc:spt:fininv:v:4:y:2015:i:3:f:4_3_2
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    Cited by:

    1. Yang, Sheng-Ping, 2017. "Exchange rate dynamics and stock prices in small open economies: Evidence from Asia-Pacific countries," Pacific-Basin Finance Journal, Elsevier, vol. 46(PB), pages 337-354.
    2. Tang, Xiaobo & Yao, Xingyuan, 2018. "Do financial structures affect exchange rate and stock price interaction? Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 34(C), pages 64-76.
    3. Leila Dagher & Ibrahim Jamali & Nasser Badra, 2020. "The Predictive Power of Oil and Commodity Prices for Equity Markets," World Scientific Book Chapters, in: Stéphane Goutte & Khaled Guesmi (ed.), Risk Factors and Contagion in Commodity Markets and Stocks Markets, chapter 3, pages 47-82, World Scientific Publishing Co. Pte. Ltd..

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