International Conference on Eurasian Economies
4-5 November 2010 – Istanbul, TURKEY
Paper detail
Paper ID : 168
Status : Paper published
Language : Turkish
Topic : Finance and Financial Crises
Presenter: Dr. Bekir Elmas
Session : 3A Küresel Kriz ve Finans
Determining a Dynamic Relationship Between Stock Prices and Exchange Rates: An Empirical Study on Eurasia
Hisse Senedi Fiyatları İle Döviz Kuru Arasındaki Dinamik İlişkinin Belirlenmesi: Avrasya Örneği
- Dr. Bekir Elmas (Atatürk University, Türkiye)
- Asst. Prof. Dr. Ömer Esen (Tekirdağ Namik Kemal Üniversitesi, Türkiye)
Abstract
The stock price has a close relationship with some macroeconomic variables. As examples of the main macroeconomic variables can be shown that exchange rates, inflation, interest rate, growth rates. This paper empirically examined the relationship between the local stock market indexes and exchange rate (USD) in six Eurasian countries namely Turkey, Germany, France, Netherlands, Russia, France and India. The paper set out by testing existence of a long-term relationship between considered two variables using the Engle-Granger (1987), Johansen (1988, 1995) and Johansen-Juselius (1990) cointegration methods. Results of Engle- Granger cointegration test showed that there is no cointegration linkage between two variables under consideration. Furthermore, The Johansen cointegration test found that there is a long-term relationship between two variables (variables in the two countries). Under the VAR (Vector Autoregressive) and VEC (Vector Error Correction) models appllied the Granger causality test, revealed an unidirectional casual relationship between two variables in each of the six countries. In addition as regards the relationship While there is a unidirectional causal relationship running from exchange rate to stock market for four countries. However this relation is casual running from stock market to exchange rate for other two countries. According to the direction of the relationship these results that relationship between stock prices and exchange rate in four countries supports for the “Traditional Approach”. Furthermore, this relation also supports for the “Portfolio Approach” for other two countries.
JEL codes: F31, G10, G15
Elmas, Bekir, Esen, Ömer (2010). "Determining a Dynamic Relationship Between Stock Prices and Exchange Rates: An Empirical Study on Eurasia" in Proceedings of International Conference of Eurasian Economies 2010, pp.183-193, Istanbul, TURKEY.
DOI: https://doi.org/10.36880/C01.00168
Session 3A: Küresel Kriz ve Finans
