An Assessment Of The Stock Market And Exchange Rate Dynamics In Industrialized And Emerging Markets

Abstract

This paper adopts an Exponentional General Autoregressive Conditional Heteroskedasticity (EGARCH) framework to explore the relationship between stock prices and exchange rates for two groups of countries: emerging and developed economies. Results show that some positive significant price spillovers from the foreign exchange market to the stock market exist for Canada, Japan, the U.S and India. Findings also show for the developed countries, there is no persistence of volatility in the stock markets and the exchange rate markets. For the emerging economies, findings point to the opposite: volatility is pronounce and enduring.