On the relation between stock prices and exchange rates: a review article
Abstract
Purpose
While changes in stock prices are said to affect exchange rates, exchange rate changes are also said to affect stock prices. The purpose of this paper is threefold. First, the authors review all empirical literature by dividing them into two groups of univariate and multivariate studies. Second, a table which summarizes the main features of each study is provided to help future researchers to have easy access to summary of each study. Finally, a new direction for future research is proposed. This new direction relies upon non-linear ARDL approach and shows how to investigate symmetric vs asymmetric effects of exchange rate changes on stock prices.
Design/methodology/approach
The paper reviews existing published work and provides suggestions for future research.
Findings
The paper reviews existing published work and provides suggestions for future research. An application reveals that exchange rate changes have asymmetric effect on stock prices.
Originality/value
This is the first review paper on the relation between exchange rates and stock prices.
Keywords
Acknowledgements
JEL Classification — F31, G15
Citation
Bahmani-Oskooee, M. and Saha, S. (2015), "On the relation between stock prices and exchange rates: a review article", Journal of Economic Studies, Vol. 42 No. 4, pp. 707-732. https://doi.org/10.1108/JES-03-2015-0043
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited