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Relationship between Exchange Rates and Stock Prices GCC Perspectives

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  • Jassim Al-Daham

Abstract

The main objective of this paper is to investigate the relation between the exchange rates and stock prices of the six GCC countries. The empirical results indicate that there is cointegration between stock prices and exchange rates in Kuwait, Bahrain and Oman. The Granger causality test reveals that exchange rates (in terms of the GBP) cause stock prices in all GCC countries, while stock prices cause exchange rates in Oman and Kuwait. Conversely, the empirical evidence indicates that exchange rates (in terms of the JPY) cause stock prices in Kuwait, while there is only one case of bidirectional causality between stock prices and exchange rates (the case of Oman).

Suggested Citation

  • Jassim Al-Daham, 2017. "Relationship between Exchange Rates and Stock Prices GCC Perspectives," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 11-24.
    • Handle: RePEc:eco:journ1:2017-02-03
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    References listed on IDEAS

    as
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    2. Bartov, Eli & Bodnar, Gordon M, 1994. "Firm Valuation, Earnings Expectations, and the Exchange-Rate Exposure Effect," Journal of Finance, American Finance Association, vol. 49(5), pages 1755-1785, December.
    3. Ajayi, Richard A. & Friedman, Joseph & Mehdian, Seyed M., 1998. "On the relationship between stock returns and exchange rates: Tests of granger causality," Global Finance Journal, Elsevier, vol. 9(2), pages 241-251.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Exchange Rate; Stock Price; Basket Currency; Peg Currency; Cointegration; Granger Causality;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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