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
Views 3134 Downloads 134
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
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.
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.
Aggarwal, R. (1981). Exchange rates and stock prices: A study of U.S. capital markets under floating exchange rates. Akron Business and Economics Review, 12(2), 7-12.
Alhayky, A. and Houdou, O. (2009). Stock prices and exchange rates: Empirical evidence from Kuwait’s financial markets. The IUP Journal of Financial Economics, 7 ( 3 & 4), 71-83.
Ajayi, R. A. and Mougoue. M. (1996) . On the dynamic relation between stock prices and exchange rates. Journal of Financial Research, 19, 193–207.
Ang, J. S. and Ghallab, A. (1976) . The impact of US devaluation on the stock prices of multinational cooperations. Journal of Business Research, 4, 25–34.
Aydemir, O. and Demirhan, E. ( 2009) . The relationship between stock prices and exchange rates evidence from Turkey. International Research Journal of Finance and Economics, 23, 207- 215.
Franck, P and Young, A. (1972 ). Stock price reaction of multinational firms to exchange realignments. Financial Management, 1, 66–73.
Hamrita, M. E. and Trifi, A. (2011). The relationship between interest rate, exchange rate and stock price: A wavelet analysis. International Journal of Economics and Financial Issues, 1( 4), 220-228.
Ismail, M. T. and Isa, Z. B. ( 2009) . Modeling the interactions of stock price and exchange rate in Malaysia. The Singapore Economic Review, 54 (4), 605–619.
Ma, C.K. and Kao, G.W. ( 1990). On exchange rate changes and stock price reactions. Journal of Business and Accounting, 17(2), 441-449.
Mishra, A. K.. (2004). Stock market and foreign exchange market in India: Are they related. South Asian Journal of Management, 11, 12–31.
Morley, B. and Pentecost, E. J., 2000 . Common trends and cycles in G-7 countries exchange rates and stock prices. Applied Economics Letters, 7, 7-10.
Morley, B (2002). Exchange rates and stock prices: Implications for European convergence. Journal of Policy Modeling, 24, 523–526.
Oskooee, M. B. and Sohrabian, A. (1992). Stock prices and the effective exchange rate of the dollar. Applied Economics, 24, 459-464.
Ratanapakorn, O. and Sharma, S. C. ( 2007). Dynamic analysis between the US stock returns and the macroeconomic variables. Applied Financial Economics, 17, 369–377.
Reddy, Y. V. and Sebastin, A. (2008). Interaction between forex and stock markets in India: An entropy approach. IKALPA, 33(4), 27-46.
Sampath, T. (2011). Macroeconomic variables and stock prices in India: An empirical analysis. The IUP Journal of Monetary Economics, 9 (4), 40-53.
Srinivasan, P. (2011). Causal nexus between stock market return and selected macroeconomic variables in India: Evidence from the National Stock Exchange (NSE). The IUP Journal of Financial Risk Management, 8( 4), 7-25.
Solnik, B. (1987). Using financial prices to test rates models: A note. Journal of Finance, 42(1), 141-149.
Soenen, L. A and Hennigar, E. S. (1988). An analysis of exchange rates and stock prices: The US experience between 1980 and 1986. Akron Business and Economic Review, 19, 7–16.