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Asymmetry cointegration between the value of the dollar and sectoral stock indices in the U.S

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  • Bahmani-Oskooee, Mohsen
  • Saha, Sujata

Abstract

Previous studies that have investigated the effects of exchange rate changes on stock prices, have assumed that such effects are symmetric. Recently, one study addressed the asymmetric effects of exchange rate changes on the S & P 500 index using U.S. data and showed that exchange rate changes have asymmetric effects on the S & P 500 index in the short run but not in the long run. Suspecting that such findings could suffer from aggregation bias, in this paper we investigate the asymmetric effects of exchange rate changes on the stock price indices of eleven different sectors in the U.S. Using asymmetry cointegration and nonlinear ARDL approach, we find that changes in the nominal effective exchange rate of the dollar has significant asymmetric effects in the short run in ten sectors. These effects last into the long run asymmetric effects in six of the eleven sectors. In five of these six sectors, while dollar depreciation has a positive impact on their share prices, dollar appreciation does not.

Suggested Citation

  • Bahmani-Oskooee, Mohsen & Saha, Sujata, 2016. "Asymmetry cointegration between the value of the dollar and sectoral stock indices in the U.S," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 78-86.
    • Handle: RePEc:eee:reveco:v:46:y:2016:i:c:p:78-86
    DOI: 10.1016/j.iref.2016.08.005
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    6. Hacievliyagil Nuri & Eksi Ibrahim Halil, 2019. "A Micro Based Study on Bank Credit and Economic Growth: Manufacturing Sub-Sectors Analysis," South East European Journal of Economics and Business, Sciendo, vol. 14(1), pages 72-91, June.
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    8. Wei Sun & Kuhelika De, 2019. "Real Exchange Rate, Monetary Policy, And The U.S. Economy: Evidence From A Favar Model," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 552-568, January.
    9. Shoukun Jiao & Wuyi Ye, 2022. "Dependence and Systemic Risk Analysis Between S&P 500 Index and Sector Indexes: A Conditional Value-at-Risk Approach," Computational Economics, Springer;Society for Computational Economics, vol. 59(3), pages 1203-1229, March.
    10. Nguyen, Dat Thanh & Phan, Dinh Hoang Bach & Anglingkusumo, Reza & Sasongko, Aryo, 2021. "US government shutdowns and Indonesian stock market," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    11. Afees A. Salisu & Kazeem Isah & Nnenna Ogbonnaya‐Orji, 2022. "A firm level analysis of asymmetric response of U.S. stock returns to exchange rate movements," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1220-1239, January.
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