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The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach

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  • Tsai, I-Chun

Abstract

This paper uses the data of six Asian countries to estimate the relationship between stock price index and exchange rate. According to the portfolio balance effect, these two variables should be negatively related. However, since the evidence from traditional ordinary least squares estimation is not favorable, the quantile regression model is adopted to observe the various relationships between stock and foreign exchange markets. The results show an interesting pattern in the relation of these two markets in Asia, which indicates that the negative relation between stock and foreign exchange markets is more obvious when exchange rates are extremely high or low.

Suggested Citation

  • Tsai, I-Chun, 2012. "The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(3), pages 609-621.
    • Handle: RePEc:eee:intfin:v:22:y:2012:i:3:p:609-621
    DOI: 10.1016/j.intfin.2012.04.005
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    More about this item

    Keywords

    Stock market; Foreign exchange market; Exchange rate; Asian markets; Quantile regression;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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