The role of exchange rate fluctuations in the volatility and correlations in emerging markets

Tse-Shih Wang, I. Ming Jiang, Horng Jinh Chang, Johnson T.S. Cheng

研究成果: Article同行評審

摘要

The recent episodes of sanctions on Russia by international communities and the quantitative easing by Japanese and European central banks highlight the importance of foreign exchange risk for international investors. This paper examines how and to what extent the volatility of exchange rate affect the volatility of local equity market for Latin American countries and transition economies. Compared to Mun [15], we find that the proportions of volatility of local equity market attributable to exchange rate fluctuations for Latin American countries and transition economies are much larger than those for more developed economies. Besides, an increase in exchange rate volatility is associated with an increase in the correlation between the local and the US equity markets for Latin American countries but with a decrease in the correlation for transition economies, both to a larger extend than developed countries. In particular, our study indicates that the sign of the conditional correlation coefficient between exchange rate and local equity market varies across countries and time, inconsistent with the prediction by the so called "equity parity condition" in Hau and Rey [8].

原文English
頁(從 - 到)219-238
頁數20
期刊International Journal of Information and Management Sciences
26
發行號3
DOIs
出版狀態Published - 2015 九月 1

All Science Journal Classification (ASJC) codes

  • 控制與系統工程
  • 管理資訊系統
  • 策略與管理
  • 工業與製造工程
  • 資訊系統與管理

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