Nexus between Stock Exchange Index and Exchange Rates
International Journal of Economics, Finance and Management Sciences
Volume 1, Issue 6, December 2013, Pages: 330-334
Received: Oct. 24, 2013; Published: Nov. 10, 2013
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Authors
Md. Zahangir Alam, Department of Business Adminsitration, International Islamic University Chittagong, Dhaka Campus, Bangladesh
Muhammad Abdur Rahim, General Banking Department, Main Branch, Mercantile Bank Ltd., Dhaka, Bangladesh
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Abstract
This study is about to analyze the nexus between stock exchange index and exchange rates. Secondary data, namely the daily Dhaka Stock Exchange General Index and the BDT/USD Exchange Rates data from December 02, 2012 to April 30, 2012 are used for the study perpose. The findings of this study revealed that 73.1802% of the variation in DSE general index returns is explained by the BDT/USD exchange rates returns which imply that there is a strong nexus between these two financial series. LM test’s outcomes indicate that there is a serial correlation at order 1; historical figures of the residuals can be applied to predict the present values of residuals. ARCH test illustrates that the residuals are hete-roskedastic; and variance of residuals is not constant. Normality test of the distribution of the residuals shows that the resi-duals are normally distributed.
Keywords
ARCH, LM, Stock Index, Exchange Rates
To cite this article
Md. Zahangir Alam, Muhammad Abdur Rahim, Nexus between Stock Exchange Index and Exchange Rates, International Journal of Economics, Finance and Management Sciences. Vol. 1, No. 6, 2013, pp. 330-334. doi: 10.11648/j.ijefm.20130106.20
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