The aim of this study was to investigate the relationship between the exchange rate and the stock market price in Zambia using the time series monthly data from2004 to 2016. To measure the stock market prices, we used LuSE overall index (LuSE Index) and the exchange rate was measured using the Zambia's Real Effective Exchange Rate (REER). In order to establish the relationship between the exchange rate and the stock market price, we employed the Vector Autoregression (VAR) based cointegration test methodology and Auto Regression distribution lag (ARDL) bound tests. The Johansson cointegration test results revealed the existence of the cointegration long run. However the Auto Regression distribution lag bound tests show that its impact is statistically insignificant. The Vector Error Correction Model (VECM) revealed that there is no short-run relationship between the exchange rate and stock market prices. The findings of this study have implications for academicians, policy makers and investors.
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