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Stock Price Index and Exchange Rate Nexus in African Markets

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  • Jimoh Olajide Raji
  • Yusnidah Ibrahim
  • Siti-Aznor Ahmad

Abstract

This paper examines the relationship between stock price index and exchange rate in six African markets using monthly data for the period January 2007 to October 2015. A quantile regression approach is used. This methodology is shown to perform better than the ordinary least squares estimators, particularly when the conditional distribution is heterogeneous. Our empirical evidence reveals an interesting pattern in the association of these two financial markets in Africa, which shows that the negative relationship between stock and foreign exchange markets is more apparent when exchange rates are extremely low or high. The negative relationship between the two variables is in line with the portfolio balance effect.

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  • Jimoh Olajide Raji & Yusnidah Ibrahim & Siti-Aznor Ahmad, 2017. "Stock Price Index and Exchange Rate Nexus in African Markets," International Economic Journal, Taylor & Francis Journals, vol. 31(1), pages 112-134, January.
    • Handle: RePEc:taf:intecj:v:31:y:2017:i:1:p:112-134
    DOI: 10.1080/10168737.2016.1245354
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