IDEAS home Printed from https://ideas.repec.org/p/eid/wpaper/15973.html
   My bibliography  Save this paper

Exchange Rates and Stock Prices in the Long Run and Short Run

Author

Listed:
  • Morley, Bruce

Abstract

Using the ARDL bounds testing approach to cointegration this paper provides evidence of a stable long run relationship between the exchange rate and stock prices for the UK, Japan and Swiss currencies with respect to the US dollar. The resultant error correction models suggest a positive relationship between stock prices and the exchange rate, which in an out-of-sample forecast outperforms the random walk. We compare these results with a similar model incorporating interest rates, suggested by Solnik (1987), however this does not in general improve the results.

Suggested Citation

  • Morley, Bruce, 2009. "Exchange Rates and Stock Prices in the Long Run and Short Run," Department of Economics Working Papers 15973, University of Bath, Department of Economics.
  • Handle: RePEc:eid:wpaper:15973
    as

    Download full text from publisher

    File URL: http://opus.bath.ac.uk/15973/1/0509.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bruce Morley, 2007. "The monetary model of the exchange rate and equities: an ARDL bounds testing approach," Applied Financial Economics, Taylor & Francis Journals, vol. 17(5), pages 391-397.
    2. Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, September.
    3. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
    4. Smith, C. E., 1992. "Stock markets and the exchange rate: A multi-country approach," Journal of Macroeconomics, Elsevier, vol. 14(4), pages 607-629.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Apergis, Nicholas & Zestos, George K. & Shaltayev, Dmitriy S., 2012. "Do market fundamentals determine the Dollar–Euro exchange rate?," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 1-15.

    More about this item

    Keywords

    stock prices; forecast; cointegration; exchange rates;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:eid:wpaper:15973. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Research Publications Librarian). General contact details of provider: http://edirc.repec.org/data/debatuk.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.