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Return-volatility linkages in the international equity and currency markets

Author

Listed:
  • Bill B. Francis

    (University of South Florida - College of Business Administration)

  • Iftekhar Hasan

    (Rensselaer Polytechnic Institute - Accounting, Finance & Economics)

  • Delroy M. Hunter

    (University of South Florida - College of Business Administration)

Abstract

This paper, which is motivated by the literature on international asset pricing and recent work on exchange rate determination, investigates dynamic relationshiops between major currency and equity markets. Using a multivariate GARCH framework, we examine conditional cross- autocorrelations between pairs of national equity markets and related exchange rates. This provides a parsimonious way of testing mean- volatility relationships in currency and equity markets and re-examining the robustness of relationships between equity markets, while controlling for exchange rate effects. We find that the relationship between currency and equity markets is bi-directional, significant, persistent, and independent of the relationship strictly between equity markets, and that it is better captured by the conditional second moments

Suggested Citation

  • Bill B. Francis & Iftekhar Hasan & Delroy M. Hunter, 2004. "Return-volatility linkages in the international equity and currency markets," Finance 0405022, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0405022
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    References listed on IDEAS

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    Cited by:

    1. Kauko, Karlo, 2004. "The links between securities settlement systems: An oligopoly theoretic approach," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 585-600.
    2. Keloharju, Matti & Malkamäki, Markku & Nyborg, Kjell G. & Rydqvist, Kristian, 2002. "A Descriptive analysis of the Finnish treasury bond market 1991-1999," Bank of Finland Research Discussion Papers 16/2002, Bank of Finland.
    3. repec:kap:iaecre:v:17:y:2011:i:2:p:119-133 is not listed on IDEAS
    4. Mikko Niskanen, 2004. "Lender of last resort and the moral hazard problem," Macroeconomics 0405016, University Library of Munich, Germany.
    5. Sinha, Pankaj & Sinha, Gyanesh, 2010. "Volatility Spillover in India, USA and Japan Investigation of Recession Effects," MPRA Paper 47190, University Library of Munich, Germany, revised 17 May 2013.
    6. Peik Granlund, 2004. "Bank exit legislation in US, EU and Japanese financial centres," Finance 0405015, University Library of Munich, Germany.

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    More about this item

    Keywords

    international asset pricing; exchange rate determination; equity markets; relationships between currency and equity markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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