Exchange Rates and Stock Prices in the Long Run and Short Run


Morley, B., 2009. Exchange Rates and Stock Prices in the Long Run and Short Run. Working Paper. Bath, U. K.: Department of Economics, University of Bath. (Bath Economics Research Working Papers; 5/09)

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    Using the ARDL bounds testing approach to cointegration this paper provides evidence of a stable long run relationship between the exchange rate and stock prices for the UK, Japan and Swiss currencies with respect to the US dollar. The resultant error correction models suggest a positive relationship between stock prices and the exchange rate, which in an out-of-sample forecast outperforms the random walk. We compare these results with a similar model incorporating interest rates, suggested by Solnik (1987), however this does not in general improve the results.


    Item Type Reports/Papers (Working Paper)
    CreatorsMorley, B.
    Uncontrolled Keywordsstock prices,forecast,cointegration,exchange rates
    DepartmentsFaculty of Humanities & Social Sciences > Economics
    Research CentresBath Economics Research
    ID Code15973


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