Stock Prices and Exchange Rate Nexus in Pakistan: An Empirical Investigation Using MGARCH-DCC Model

• 발행기관: 한국유통과학회
• 저자명: Tabassam RASHID Malik Fahim BASHIR
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』The Journal of Asian Finance, Economics, and Business Vol. 9 No.5, 1~9쪽, 전체 9쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2022.05.30

영문 초록

The study examines stock prices (LOGKSE) and exchange rate (LOGPK)-Pakistani Rupee vis-à-vis US Dollar- interactions in Pakistan. This study employs a multivariate VAR-GARCH model using monthly data from January 2012 to October 2020. The results of the Johansen cointegration test show that there is no relationship between Foreign Exchange Market and Stock Market in the long run. In the short-run, stock exchange returns are affected slightly negatively by the changes in the foreign exchange market, but the foreign exchange market does not seem to be affected by the ups and downs of the stock exchange. The VAR model and Granger Causality show that both markets are strongly influenced by their own lagged values rather than by the lagged values of one another and show weak or no correlation between the two markets. Volatility persistence is observed in both the stock and foreign exchange markets, implying that shocks and past period volatility are major drivers of future volatility in both markets. Thus greater uncertainties today will induce panic and consequently generate higher volatility in the future period. This phenomenon has been observed many times on Pakistan Stock Exchange especially. The results have important implications for local international investors in portfolio diversification decisions and risk hedging strategies.

목차

1. Introduction

2. History of Stock Market Development in Pakistan and Exchange Rate Regimes

3. Literature Review

4. Methodology

5. Empirical Results

6. Conclusion

References

키워드

Financial Economics Emerging Markets VAR-GARCH Johansen Cointegration Granger Causality