Do Bulls and Bears Understand Exchange Rate Dynamics? Evidence from Global Scenario

Authors

  • Nitin Kulshrestha
  • Dr. Shalini Aggarwal
  • Dr. Navjit Singh

Keywords:

Forex, Nifty50, Correlation, Equilibrium, Price

Abstract

The motivation of the present study to investigate and understand the correlation of adjusted closing prices of forex and index (EUR/INR, GDP/INR, Nifty50, CNXIT) which is traded at National Stock Exchange, India. The empirical analysis of three years of data with the help of E-views software. After investigation, it can conclude there is a steady correlation ship among the group. CNXIT having a more robust relationship with Forex as compare to Nifty50. It shows a short-run equilibrium relationship variable but, long-run equilibrium among variables, but shows a very strong co-relation among all the research variable (EUR/INR, GDP/INR, Nifty50, CNXIT. Due to above support it determine the unidirectional price detection dynamics. The co-integration test allows high degree of relationships among variables.

Downloads

Download data is not yet available.

References

P. Franck and A. Young, “Stock Price Reaction of Multinational Firms to Exchange Realignments,” Financ. Manag., vol. 1, no. 3, p. 66, 1972, doi: 10.2307/3665374.

R. Aggarwal, “Exchange_rates_and_stock_prices_A_study.pdf,” Akron Business and Economic Review, no. 12. pp. 7–12, 1981.

M. Mougoue, “On the Dynamic Relation Between Stock Prices,” vol. XIX, no. 2, pp. 193–207, 1996.

D. Stavarek, “Munich Personal RePEc Archive Stock Prices and Exchange Rates in the EU and the USA : Evidence of their Mutual Interactions Stock Prices and Exchange Rates in the EU and the USA : Evidence of their Mutual Interactions,” no. 7297, 2008.

A. K. Mishra, “Stock Market and Foreign Exchange Market in India: Are they Related?,” South Asia Econ. J., vol. 5, no. 2, pp. 209–232, 2004, doi: 10.1177/139156140400500202.

D. Gounopoulos, P. Molyneux, S. K. Staikouras, J. O. S. Wilson, and G. Zhao, “Exchange rate risk and the equity performance of financial intermediaries,” Int. Rev. Financ. Anal., vol. 29, pp. 271–282, 2013, doi: 10.1016/j.irfa.2012.04.001.

C. C. Nieh and C. F. Lee, “Dynamic relationship between stock prices and exchange rates for G-7 countries,” Q. Rev. Econ. Financ., vol. 41, no. 4, pp. 477–490, 2001, doi: 10.1016/S1062-9769(01)00085-0.

T. Sueshige, K. Kanazawa, H. Takayasu, and M. Takayasu, “Ecology of trading strategies in a forex market for limit and market orders,” PLoS One, vol. 13, no. 12, pp. 1–14, 2018, doi: 10.1371/journal.pone.0208332.

M. Bahmani-Oskooee and A. Sohrabian, “Stock prices and the effective exchange rate of the dollar,” Appl. Econ., vol. 24, no. 4, pp. 459–464, 1992, doi: 10.1080/00036849200000020.

C. W. J. Granger, B. N. Huangb, and C. W. Yang, “A bivariate causality between stock prices and exchange rates: Evidence from recent Asianflu,” Q. Rev. Econ. Financ., vol. 40, no. 3, pp. 337–354, 2000, doi: 10.1016/s1062-9769(00)00042-9.

B. SOLNIK, “Using Financial Prices to Test Exchange Rate Models: A Note,” J. Finance, vol. 42, no. 1, pp. 141–149, 1987, doi: 10.1111/j.1540-6261.1987.tb02555.x.

K. Phylaktis and F. Ravazzolo, “Stock Prices and Exchange Rate Dynamics,” SSRN Electron. J., pp. 1–40, 2005, doi: 10.2139/ssrn.251296.

H. Hau and H. Rey, “Exchange rates, equity prices, and capital flows,” Rev. Financ. Stud., vol. 19, no. 1, pp. 273–317, 2006, doi: 10.1093/rfs/hhj008.

K. Phylaktis and F. Ravazzolo, “Stock prices and exchange rate dynamics,” J. Int. Money Financ., vol. 24, no. 7, pp. 1031–1053, 2005, doi: 10.1016/j.jimonfin.2005.08.001.

Downloads

Published

2021-02-28

How to Cite

Kulshrestha, N. ., Aggarwal, D. S. ., & Singh, D. N. . (2021). Do Bulls and Bears Understand Exchange Rate Dynamics? Evidence from Global Scenario. The Journal of Contemporary Issues in Business and Government, 27(1), 2185–2193. Retrieved from https://cibgp.com/au/index.php/1323-6903/article/view/696

Issue

Vol. 27 No. 1 (2021): The journal of contemporary issues in business and government

Section

Articles

License

You are free to:

  1. Share — copy and redistribute the material in any medium or format for any purpose, even commercially.
  2. Adapt — remix, transform, and build upon the material for any purpose, even commercially.
  3. The licensor cannot revoke these freedoms as long as you follow the license terms.

Under the following terms:

  1. Attribution — You must give appropriate credit , provide a link to the license, and indicate if changes were made . You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
  2. No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.

Notices:

You do not have to comply with the license for elements of the material in the public domain or where your use is permitted by an applicable exception or limitation .

No warranties are given. The license may not give you all of the permissions necessary for your intended use. For example, other rights such as publicity, privacy, or moral rights may limit how you use the material.