Dynamic relationship between exchange rate and stock price: Evidence from China

The paper empirically analyzes the dynamic relationship between Renminbi (RMB) real effective exchange rate and stock price with VAR and multivariate generalized autoregressive conditional heteroskedasticity (GARCH) models using monthly data from January 1991 to June 2009. The results show that ther...

Full description

Saved in:
Bibliographic Details
Published inResearch in international business and finance Vol. 24; no. 2; pp. 103 - 112
Main Author Zhao, Hua
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.06.2010
Elsevier
SeriesResearch in International Business and Finance
Subjects
Exchange rate
Multivariate GARCH
Regime change
Stock price
VAR
VAR Multivariate GARCH Volatility spillovers Exchange rate Stock price Regime change
Volatility spillovers
C3
VAR
Regime change
Stock price
Exchange rate
F4
Multivariate GARCH
Volatility spillovers
Online AccessGet full text

Cover

More Information
Summary:The paper empirically analyzes the dynamic relationship between Renminbi (RMB) real effective exchange rate and stock price with VAR and multivariate generalized autoregressive conditional heteroskedasticity (GARCH) models using monthly data from January 1991 to June 2009. The results show that there is not a stable long-term equilibrium relationship between RMB real effective exchange rate and stock price. There are also not mean spillovers between the foreign exchange and stock markets. Furthermore, the paper examines the cross-volatility effects between foreign exchange and stock markets using likelihood ratio statistic. There exist the bidirection volatility spillovers effects between the two markets, indicating the past innovations in stock market have the great effect on future volatility in foreign exchange market, and vice versa.
ISSN:0275-5319
1878-3384
DOI:10.1016/j.ribaf.2009.09.001