Niyati Bhanja

The Relationship between Stock Price Index and Exchange Rate in Asian Markets: A Wavelet Based Correlation and Quantile Regression Approach

We use data set of five Asian countries to estimate the frequency and quantile based relationship between stock price index and exchange rate. We apply simple correlation and wavelet based correlation and in accordance with the portfolio balance effect, we find that the two variables are negatively related at all frequencies. Moreover it is found that correlation grows stronger with higher time scales. We further apply quantile regression to observe the various relationships between stock and foreign exchange markets at different quantiles of exchange rates. The results show an interesting pattern in the relation of these two markets in Asia, which indicates that the negative relation is asymmetric across different quantiles of exchange rates and more obvious when exchange rates are extremely low or both high and low.

A historical analysis of the US stock price index using empirical mode decomposition over 1791–2015

In this paper, the dynamics of Standard and Poors 500 (S&P 500) stock price index is analysed within a time-frequency framework over a monthly period 1791:08-2015:05. Using the Empirical Mode Decomposition technique, the S&P 500 stock price index is divided into different frequencies known as intrinsic mode functions (IMFs) and one residual. The IMFs and the residual are then reconstructed into high frequency, low frequency and trend components using the hierarchical clustering method. Using different measures, it is shown that the low frequency and trend components of stock prices are relatively important drivers of the S&P 500 index. These results are also robust across various subsamples identified based on structural break tests. Therefore, US stock prices have been driven mostly by fundamental laws rooted in economic growth and longterm returns on investment.

The relationship between stock prices and exchange rates in Asian markets

Purpose – The purpose of this paper is to estimate the relationship between stock prices and exchange rates of eight Asian countries. The analysis is based on methodologies that possess the ability to provide a complete representation of data series from both time and frequency perspectives simultaneously. In addition, instead of limiting the analysis to focus on the conditional mean of the response variable y in the regression equation, the authors investigate the extremes of distribution to reveal a range of hidden relationships between these variables. Design/methodology/approach – Given the limitations of classical methodology of Pearson correlation and least-squares regression, this study estimates the relationship between stock prices and exchange rates through wavelet correlation and cross-correlation to serve as a protocol for different traders who view the market with different time resolutions. In addition, quantile regression technique robust to heteroscedasticity, skewness and leptokurtosis is...