Interrelations among stock prices of South Africa and the United States and the rand/dollar exchange rate
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Date
2007
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Stellenbosch University
Abstract
This paper seeks to examine the dynamic short-term causal relations and the long-term
equilibrium relations between the two major financial assets, stock prices of the US and South
Africa and the rand/US$ exchange rate. The study uses a mixed bag of time series approaches
such as cointegration, Granger causality, impulse response functions and forecasting error
variance decompositions. The study identifies a long-run relationship among the rand/US$
exchange rate and the stock prices of South Africa and the United States. It was also observes
that there is a causal relationship from the stocks in the United States to the rand/US$ exchange
rate. In the short run however, the interactions among the variables are quite modest. The result
of the study has implications for investors, policy makers and researchers.
Description
Keywords
Exchange rate, Cointegration, Stock price, Impulse response, Granger causality, Variance decomposition
Citation
Ocran, M. K. (2007). Interrelations among stock prices of South Africa and the United States and the rand/dollar exchange rate . A paper presented at the 12th Annual Conference of the African Econometric Society Cape Sun Hotel, Cape Town.