Volatility Spillover of Exchange Rate on Stock Market Evidence from South Africa

The present study analyses the volatility spillover of exchange rate on South African Stock Market. The Capital market of South Africa has yardstick of African markets. The economic factors are crucially impacting the returns of stock of South Africa. The study collected data from Johannesburg Stock Exchange (JSE) website and Exchange rate from www.resbank.co.za and used the monthly data available from May 2009 to May 2020. The paper employed the statistical tools such as descriptive statistics test, Augmented Dickey-Fuller test, Correlation, GRACH (Generalized Autoregressive Conditional Heteroskedasticity) model, Cointegration test and Granger Causality test. The major finding of this study described that changes in exchange rate were significant, and negative linkages influenced low on Johannesburg Stock Exchange (JSE). The presence of long run cointegration was the reason for the absence of causal effect during the study period. The study concluded that change or movement of exchange was negative and low and it would cause miniature impact on returns of Johannesburg Stock Exchange (JSE). The investors' community should consider the movement of economic factor such as exchange rate for the long term which would agree concretely to go for the investment decision in African Capital Market. The policymaker could become more supportive to exports and export companies which bring stationary in stock market.