THE RELATIONSHIP BETWEEN STOCKS AND EXCHANGE RATES: AN ANALYSIS FROM LEHMAN BROTHERS COLLAPSE IN THE USA

Year 2021, Volume: 6 Issue: 2, 442 - 453, 23.12.2021

Oğuzhan Ercan , Jale Oran

https://doi.org/10.54452/jrb.954290

Abstract

In this study, we comparatively examine the issue of granger causality between exchange rates and stock index for the United States before and after global financial crisis within the context of Lehman Brothers’ collapse. The analysis includes the monthly stock index and exchange rate data. Euro and Swiss Franc parities against Dollar were selected as exchange rates. After the investigation we found out that Dow Jones Industrial Average and USD/CHF were the Granger cause of USD/EUR exchange rates before the collapse of Lehman Brothers. However, there is no causality after the collapse.

Keywords

Stock prices, exchange rates, granger causality test, johansen co-integration test, financial crisis

HİSSE SENETLERİ VE DÖVİZ KURLARI ARASINDAKİ İLİŞKİ: BİRLEŞİK DEVLETLER’DEKİ LEHMAN BROTHERS’IN ÇÖKÜSÜ ÜZERİNE BİR ANALİZ

Abstract

Çalışma küresel finansal kriz öncesi ve sonrası Amerika Birleşik Devletleri için döviz kurları ile hisse senedi endeksi arasındaki granger nedensellik konusunu Lehman Brothers’ın çöküşü kapsamında karşılaştırmalı olarak incelemektedir. Analiz, aylık hisse senedi endeksi ve döviz kuru verilerini içerir. Döviz kuru olarak Dolar karşısındaki Euro ve İsviçre Frangı pariteleri seçilmiştir. Analizin ardından, Dow Jones Industrial Average ve USD/CHF’nin, Lehman Brothers’ın çöküşünden önceki USD/EUR döviz kurunun Granger nedeni olduğu ortaya çıkmıştır. Ancak, Lehman Brothers’ın çöküşünden sonra nedensellik ortadan kalkmaktadır.

Keywords

Hisse senedi fiyatları, döviz kuru, granger nedensellik test, johansen eşbütünleşme testi, finansal kriz

References

• Aggarwal, R. (1981). Exchange Rates and Stock Prices: A Study of U.S. Capital Market under Floating Exchange Rates. Akron Bussiness and Economic Review, Vol. 12, No : 3, pp. 7-12.
• Ajayi, R. A. & Mougoue, M. (1996). On the dynamic relation between stock prices and Exchange rates. Journal of Financial Research 19, pp. 193–207.
• Ajayi, R. A., Friedman, J., & Mehdian, S. M., (1998). On the relationship between stock returns and exchange rates: Test of granger causality. Global Finance Journal 9 (2), pp. 241–251.
• Bozkurt, H. (2007). Zaman Serileri Analizi. Bursa: Ekin Kitabevi.
• Doong, S., Yang, S. & Wang, A. T. (2005). The Dynamic Relationship and Pricing of Stocks and Exchange Rates: Empirical Evidence from Asian Emerging Markets. Journal of American Academy of Business, Cambridge 7, (1), pp. 118-123.
• Erbaykal, E. & Okuyan, H. A. (2007). Hisse Senedi Fiyatları ile Döviz Kuru ilişkisi: Gelişmekte Olan Ülkeler Üzerine Ampirik Bir Uygulama. BDDK Bankacılık ve Finansal Piyasalar Dergisi 1(1), pp. 77-89.
• Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-Spectral Methods. Econometrica: Journal of the Econometric Society, 37(3), pp. 424-438.
• Granger, C. W. J. & Newbold, P. (1974). Spurious regression in econometrics. Journal of Econometrics, 2, pp. 111-120.
• Granger, C. W. J., Huang, B & Yang, C. (2000). A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asian Flu. The Quarterly Review of Economics and Finance, Vol. 40, pp. 337 – 354.
• Inci, A. C. & Lee, B. S. (2014). Dynamic Relations between Stock Returns and Exchange Rate Changes. forthcoming European Financial Management.
• Johansen S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control. Volume 12, Issues 2–3, Pages 231-254.
• Kandir, S. Y. (2008). Macroeconomic Variables, Firm Characteristics and Stock Returns: Evidence from Turkey. International Research Journal of Finance and Economics Issue, 16: 35 - 45
• Kim, K. (2003). Dollar Exchange Rate and Stock Price: Evidence from Multivariate Cointegration and Error Correction Model. Review of Financial Economics 12, 301-313.
• Muhammad, N. & Rasheed, A. (2002). Stock Prices and Exchange Rates: Are They Related? Evidence from South Asian Countries. The Pakistan Development Review 41(4), pp. 535-550.
• Nieh, C. & Lee, C. (2001). Dynamic relationship between stock prices and exchange rates for G-7 countries. The Quarterly Review of Economics and Finance 41, pp. 477–490.
• Stavarek, D. (2005). Stock prices and exchange rates in the EU and the USA: Evidence of their mutual interactions. Journal of Economics and Finance, vol. 55 (3-4), pg. 141-161.
• Syzdykova, A. (2016). Döviz Kuru ve Enflasyon Arasındaki İlişki: BRİC Ülkeleri Örneği, Journal of International Management and Social Researches.
• Vygodina, A. V. (2006). Effects of size and international exposure of the US firms on the relationship between stock prices and exchange rates. Global Finance Journal 17, pp. 214– 223.