Exchange rate movement and stock market performance: An application of the ARDL model
The study examines the relationship between the stock market and exchange rate in South Africa for the period from 1980 to 2020. Quarterly data was used employing the Autoregressive Distributed Lag (ARDL) model given the order of integration of the variables. The empirical results revealed that ther...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2022-12-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2022.2075520 |
| _version_ | 1811248388521328640 |
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| author | Kudakwashe Zvitarise Javangwe Oliver Takawira |
| author_facet | Kudakwashe Zvitarise Javangwe Oliver Takawira |
| author_sort | Kudakwashe Zvitarise Javangwe |
| collection | DOAJ |
| description | The study examines the relationship between the stock market and exchange rate in South Africa for the period from 1980 to 2020. Quarterly data was used employing the Autoregressive Distributed Lag (ARDL) model given the order of integration of the variables. The empirical results revealed that there is a long-term relationship between the variables of interest. The results also revealed that there is a negative relationship between the stock market and exchange rate movement. The results also show that there is a negative relationship between the stock market and the interest rate as well as inflation as measured by CPI. These results imply that innovations in the exchange rate do have an impact on what happens to the stock market. The impact of exchange rates on stock market can be positive in the short run and negative in the long run and so policymakers can use our findings to avoid making unnecessary monetary or fiscal policy decisions. Policy makers may be able to know when to intervene in influencing the markets using monetary or fiscal policies. Investors and portfolio managers can apply the findings of this study to hedge against exchange rate risk, efficiently diversify their portfolios and predict future stock market movements by observing the exchange rate market. |
| first_indexed | 2024-04-12T15:27:10Z |
| format | Article |
| id | doaj.art-88c634306cf94942820b9a5796d9155f |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-04-12T15:27:10Z |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-88c634306cf94942820b9a5796d9155f2022-12-22T03:27:13ZengTaylor & Francis GroupCogent Economics & Finance2332-20392022-12-0110110.1080/23322039.2022.2075520Exchange rate movement and stock market performance: An application of the ARDL modelKudakwashe Zvitarise Javangwe0Oliver Takawira1Business Development Manager: Giesecke and Devrient Mobile Security Southern Africa, MCom Investment Management - University of Johannesburg, Johannesburg, South AfricaDepartment of Finance and Investment Management (DFIM), College of Business and Economics (CBE) - University of Johannesburg, Johannesburg, South AfricaThe study examines the relationship between the stock market and exchange rate in South Africa for the period from 1980 to 2020. Quarterly data was used employing the Autoregressive Distributed Lag (ARDL) model given the order of integration of the variables. The empirical results revealed that there is a long-term relationship between the variables of interest. The results also revealed that there is a negative relationship between the stock market and exchange rate movement. The results also show that there is a negative relationship between the stock market and the interest rate as well as inflation as measured by CPI. These results imply that innovations in the exchange rate do have an impact on what happens to the stock market. The impact of exchange rates on stock market can be positive in the short run and negative in the long run and so policymakers can use our findings to avoid making unnecessary monetary or fiscal policy decisions. Policy makers may be able to know when to intervene in influencing the markets using monetary or fiscal policies. Investors and portfolio managers can apply the findings of this study to hedge against exchange rate risk, efficiently diversify their portfolios and predict future stock market movements by observing the exchange rate market.https://www.tandfonline.com/doi/10.1080/23322039.2022.2075520exchange ratesinterest ratesinflationstock marketARDL and ECM |
| spellingShingle | Kudakwashe Zvitarise Javangwe Oliver Takawira Exchange rate movement and stock market performance: An application of the ARDL model Cogent Economics & Finance exchange rates interest rates inflation stock market ARDL and ECM |
| title | Exchange rate movement and stock market performance: An application of the ARDL model |
| title_full | Exchange rate movement and stock market performance: An application of the ARDL model |
| title_fullStr | Exchange rate movement and stock market performance: An application of the ARDL model |
| title_full_unstemmed | Exchange rate movement and stock market performance: An application of the ARDL model |
| title_short | Exchange rate movement and stock market performance: An application of the ARDL model |
| title_sort | exchange rate movement and stock market performance an application of the ardl model |
| topic | exchange rates interest rates inflation stock market ARDL and ECM |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2022.2075520 |
| work_keys_str_mv | AT kudakwashezvitarisejavangwe exchangeratemovementandstockmarketperformanceanapplicationoftheardlmodel AT olivertakawira exchangeratemovementandstockmarketperformanceanapplicationoftheardlmodel |