Causality between exchange rates and stock prices: evidence from Malaysia and Thailand

Ai-Yee Ooi and Syed Azizi Wafa Syed Khalid Wafa and Nelson Lajuni and Mohd Fahmi Ghazali (2009) Causality between exchange rates and stock prices: evidence from Malaysia and Thailand. International Journal of Business Management, 4. pp. 86-98. ISSN 1833-3850

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Abstract

This study analyses the causal relationship between exchange rates and stock prices for Thailand and Malaysia. By using daily data from 1993 to 2003, this study attempts to examine the relationship between exchange rates and stock prices in Thailand and Malaysia during pre and post financial crisis. The paper also investigates the long-run relationship between the above-mentioned variables using Johansen-Juselius (1990) cointegration test and short-run dynamic causal relationship by using Toda-Yamamoto (1995) procedure. Likewise, variance decompositions (VDCs) analysis is employed to improve the predictable portion of exchange rate (stock price) changes on the forecast error variance in stock prices (exchange rates). Data from Thailand demonstrates the results predicted by the portfolio balance approach: stock prices lead exchange rates in both pre-crisis and post-crisis periods; however, Malaysian findings support portfolio approach in post-crisis.

Item Type: Article
Keyword: Causality , Exchange Rates , Stock Prices
Subjects: H Social Sciences > HB Economic theory. Demography > HB1-3840 Economic theory. Demography > HB3711-3840 Business cycles. Economic fluctuations
Department: FACULTY > Faculty of Business, Economics and Accounting
Depositing User: SITI AZIZAH BINTI IDRIS -
Date Deposited: 28 Sep 2021 14:45
Last Modified: 28 Sep 2021 14:45
URI: https://eprints.ums.edu.my/id/eprint/29186

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