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Is the Effect of the Exchange Rate on Stock Prices Symmetric or Asymmetric? Evidence from Sudan

Author

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  • Omer Ahmed Sayed Mohamed

    (Finance and Investment, University of Tabuk, Saudi)

  • Faiza Omer Mohammed Elmahgop

    (Finance and Investment, University of Tabuk, Saudi)

Abstract

This study investigates asymmetry in the effect of the exchange rate on the Sudanese stock market prices. We applied the Nonlinear ARDL model by Shin et al. (2014) to monthly data for the period from September 2003 to September 2019, using inflation, money supply, and Murabaha profit margin as control variables. No study found that test the nonlinearity effect of the exchange rate on stock prices in Sudan. This study proposed to fill this gap by examining the impact of the exchange rate of Sudanese Pound nonlinearity on the stock prices in the Khartoum Stock Exchange. The results show that the exchange rate has asymmetric effects on stock prices in both the short run and long run. The policy implication of this paper is that modeling the exchange rate and stock prices symmetrically may affect negatively the effectiveness of economic planning. Thus, NARDL emerges as a more suitable model than the ARDL model for investigating such a relationship.

Suggested Citation

  • Omer Ahmed Sayed Mohamed & Faiza Omer Mohammed Elmahgop, 2020. "Is the Effect of the Exchange Rate on Stock Prices Symmetric or Asymmetric? Evidence from Sudan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(2), pages 209-215.
    • Handle: RePEc:eco:journ1:2020-02-23
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    References listed on IDEAS

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    Cited by:

    1. Tomader Elhassan & Bakhita Braima, 2020. "Impact of Khartoum Stock Exchange Market Performance on Economic Growth: An Autoregressive Distributed Lag ARDL Bounds Testing Model," Economies, MDPI, vol. 8(4), pages 1-16, October.

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    More about this item

    Keywords

    Exchange Rate; Stock Prices; Nonlinear Autoregressive Distributed Lag; Autoregressive Distributed Lag; Asymmetry; Symmetry;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G2 - Financial Economics - - Financial Institutions and Services

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