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On the relationship between Asian exchange rates and stock prices: a nonlinear analysis

Author

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  • Salah A. Nusair

    (Wilfrid Laurier University)

  • Jamal A. Al-Khasawneh

    (Gulf University for Science and Technology)

Abstract

This paper examines the relationship between stock prices and exchange rates for the ASEAN5 plus the Big3. While previous studies have assumed a symmetric relationship between stock prices and exchange rates, this paper introduces nonlinearity in the relationship between the two variables. The empirical model used is the nonlinear autoregressive distributed lag (NARDL) model, which introduces nonlinearity by differentiating between the increases and decreases in the independent variable. The results show that although both the linear ARDL model and the NARDL model suggest that the relationship between the variables is mainly short-term, the NARDL model produces relatively more evidence supporting asymmetric long-run relationship between stock prices and exchange rates.

Suggested Citation

  • Salah A. Nusair & Jamal A. Al-Khasawneh, 2022. "On the relationship between Asian exchange rates and stock prices: a nonlinear analysis," Economic Change and Restructuring, Springer, vol. 55(1), pages 361-400, February.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:1:d:10.1007_s10644-021-09318-8
    DOI: 10.1007/s10644-021-09318-8
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    More about this item

    Keywords

    Exchange rates; Stock prices; Asymmetry; Nonlinear ARDL model;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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