Stock market volatility and exchange rates in emerging countries: A Markov-state switching approach
By Chkili Walid, Aloui Chaker, Omar Masood, John Fry. 2011
238 citations recorded by the source corpus.
In this paper we employ a Markov-Switching EGARCH model to investigate the dynamic linkage between stock price volatility and exchange rate changes for four emerging countries over the period 1994-2009. Results distinguish between two different regimes in both the conditional mean and the conditional variance of stock returns. The first corresponds to a high mean-low variance regime and the second regime is characterized by a low mean and a high variance. Moreover, we provide strong evidence that the relationship between stock and foreign exchange markets is regime dependent and stock-price volatility responds asymmetrically to events in the foreign exchange market. Our results demonstrate that foreign exchange rate changes have a significant impact on the probability of transition across regimes.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/da391d613403ab8d820d7474dc5b2070c6667593
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In Economics and Econometrics
- Walid Chkili
- Duc Khuong Nguyen
- George Filis
- Perry Sadorsky
- Stavros Degiannakis *
- Shawkat Hammoudeh
- Sang Hoon Kang
- Walid Mensi
In Finance
Citations in the corpus
- Exchange rate movements and stock market returns in a regime-switching environment: Evidence for BRICS countries (2014, background): “More recently, Chkili et al. (2011) use a Markov-Switching EGARCH model to investigate the dynamic relationships between exchange rates and stock returns in four emerging countries (Hong Kong, Singapore, Malaysia and Mexico) during both normal and turbulent periods. They provide evidence of regimede”