Realized spill-over effects between stock and foreign exchange market: Evidence from regional analysis

Xuan, Hung; Brooks, Robert Darren; Treepongkaruna, Sirimon

doi:10.1016/j.gfj.2015.11.003

Cited by 25 publications

(14 citation statements)

References 51 publications

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“…Grobys (2015), employing the DY index, finds very little evidence of volatility spillovers during quiet economic development but a high level of total volatility spillovers following periods of economic turbulence. A similar conclusion is found by Do et al (2015), who also emphasize that it is important to account for the volatility spillover information transmission especially during turbulent periods. Further, significant directional spillovers are identified between the forex and stock markets in several studies targeting developed and emerging markets (Do et al, 2016;Andreou et al, 2013;Kumar, 2013;Kanas, 2001) or specific countries or regions including the U.S. (Ito and Yamada, 2015), Japan (Jayasinghe and Tsui, 2008), China (Zhao, 2010), the Middle East, and North Africa (Arfaoui and Ben Rejeb, 2015).…”

Section: Literature Reviewsupporting

confidence: 83%

Asymmetric volatility connectedness on the forex market

Baruník

Kočenda

Vácha

2017

Journal of International Money and Finance

213

134

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We show how bad and good volatility propagate through the forex market, i.e., we provide evidence for asymmetric volatility connectedness on the forex market. Using highfrequency, intra-day data of the most actively traded currencies over 2007-2015 we document the dominating asymmetries in spillovers that are due to bad, rather than good, volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the positive asymmetries in volatility spillovers, while fiscal factors are linked with negative spillovers.

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Section: Literature Reviewsupporting

confidence: 83%

Asymmetric volatility connectedness on the forex market

Baruník

Kočenda

Vácha

2017

Journal of International Money and Finance

213

134

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“…Researchs on the relationship between exchange rates and the firm's value, especially the stock market prices, showed a significant relationship, including the results of research by: Yau andNieh (2009), Lin (2012), Parlapianoa and Alexeev (2012), Do, Brooks et al (2015).Thus, the following hypothesis.…”

Section: Exchange Rate Business Risk and Firm's Valuementioning

confidence: 90%

Commodity Prices, Exchange Rates and Investment on Firm's Value Mediated by Business Risk: A Case from Indonesian Stock Exchange

Risman¹,

Salim²,

Sumiati³

et al. 2017

ERSJ

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This paper examines the influence of six commodity prices (Crude Oil, Coal, CPO, Gold, Nickel, Tin), exchange ratesand investment on the firm's value during the period 2010-2014, both directly and indirectly through the mediation of business risk.By applying Common Effect approach for panel data on path analysis model, we found the oil price and exchange rate (USD/IDR) are affect the firm's value, either directly or indirectly through business risk asmediation variable,but business risk does not mediate the effect of the investment on the firm's value.The study's findings support previous research results and evidence of theories, especially about the relationship of commodity prices, exchange rates, risks and value of the company.These results are useful for individual and institutional investors, managers and policy makers.

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“…Furthermore, Moore and Wang () apply the estimated DCC coefficient in a regression on the potential determinants of the correlation and discover increased capital mobility for some Asian emerging markets after the Asian crisis. Despite numerous studies showing mixed results for the relationship between stock prices and exchange rates (for example, see Ajayi & Mougoué (); Caporale, Hunter, & Ali, ; Granger, Huang, & Yang, ; Lin & Fu, ; Pan, Fok, & Liu, ), more recent studies have consistently confirmed this relationship due to the increasing integration among financial markets over the past 20 years (Do, Brooks, & Treepongkaruna, ). Thus, the portfolio balance effect is more important in Asian emerging markets during the last two decades.…”

Section: Literature Reviewmentioning

confidence: 99%

Structural breaks, dynamic correlations, and hedge and safe havens for stock and foreign exchange markets in Greater China

Dong

Yoon

2017

World Economy

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| INTRODUCTIONDuring the past few decades, the relationship between stock prices and exchange rates has attracted special attention from economists, portfolio risk managers and policymakers. These two variables are important and intrinsically linked macrofinancial variables. Previous literature provides two theoretical aspects to explain the interactions between stock prices and exchange rates.On the one hand, Dornbusch and Fischer (1980) develop the "flow-oriented" models of exchange rates that focus on the current account or the trade balance, and posit that the changes in exchange rates will affect international competitiveness and trade balances directly, thereby influencing countries' real incomes and output. Since stock prices are generally interpreted as the present values of firms' future cash flows, they respond to exchange rate changes. This is consistent with the international trading effect (Aggarwal, 1981); thus, changes in exchange rates affect stock prices positively via international competitiveness and trade balances. However, we argue that this model does not account for all cases influenced by exchange rate changes. For example, sometimes, domestic currency depreciation increases the pressure of domestic capital outflow, and domestic investors will change domestic currency into foreign currency or foreign currency-denominated financial products, thereby reducing the domestic money supply and stock prices. In the latter situation, changes in exchange rates affect stock prices negatively via the domestic capital outflow.On the other hand, Branson (1983) and Frankel (1983) present the "stock-oriented" models of exchange rates that focus on the impact of stock prices on exchange rates, which state that changes in stock prices will affect domestic capital inflows and outflows, thereby affecting the demand for money, which then leads to changes in interest rates and exchange rate movements. This is in agreement with the portfolio balance effect (Bahmani-Oskooee & Sohrabian, 1992) and monetarist models of exchange rate determination (Gavin, 1989); thus, changes in stock prices affect exchange rates negatively via capital mobility. The negative relationship between these two markets would have important implications for investors in terms of diversifying benefits.Since the Chinese government opened the Shanghai and Shenzhen stock exchange markets in 1990 and 1991, respectively, the Greater China stock markets (namely, Shanghai, Shenzhen, Hong Kong and Taiwan) have grown quickly and become increasingly attractive to foreign capital. Moreover, after the 2008-09 global financial crisis (GFC), these emerging economies applied rapid financial reform to move towards globalisation (Lin & Fu, 2016), thus increasing their interaction with the global economy through capital flows. Richards (2005) indicates that foreign capital flows can increase and decrease stock prices, and capital inflows and stock returns are positively related, particularly in emerging markets. Thus, considerable quantities of international...

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Realized spill-over effects between stock and foreign exchange market: Evidence from regional analysis

Cited by 25 publications

References 51 publications

Asymmetric volatility connectedness on the forex market

Asymmetric volatility connectedness on the forex market

Commodity Prices, Exchange Rates and Investment on Firm's Value Mediated by Business Risk: A Case from Indonesian Stock Exchange

Structural breaks, dynamic correlations, and hedge and safe havens for stock and foreign exchange markets in Greater China

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