巴西股票价格与汇率之间关系的实证分析外文翻译.docx

巴西股票价格与汇率之间关系的实证分析外文翻译.docx

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巴西股票价格与汇率之间关系的实证分析外文翻译

本科毕业论文外文原文

外文题目：

THEDYNAMICRELATIONSHIPBETWEENSTOCKPRICESANDEXCHANGERATES:

EVIDENCEFORBRAZIL

出处：

InternationalJournalofTheoreticalandAppliedFinance

作者：

BENJAMINM.TABAK

ThispaperstudiesthedynamicrelationshipbetweenstockpricesandexchangeratesintheBrazilianeconomy.Weuserecentlydevelopedunitrootandcointegrationtests,whichallowendogenousbreaks,totestforalongrunrelationshipbetweenthesevariables.Weperformedlinear,andnonlinearcausalitytestsafterconsideringbothvolatilityandlineardependence.Wefoundthatthereisnolongrunrelationship,butthereislinearGrangercausalityfromstockpricestoexchangerates,inlinewiththeportfolioapproach:

stockpricesleadexchangerateswithanegativecorrelation.Furthermore,wefoundevidenceofnonlinearGrangercausalityfromexchangeratestostockprices,inlinewiththetraditionalapproach:

exchangeratesleadstockprices.Webelievethesefindingshavepracticalapplicationsforinternationalinvestorsandinthedesignofexchangeratepolicies.

Keywords:

Stockprices;exchangerates;bivariatecausality;nonlinearcausality.

1.Introduction

Theliteraturethatstudiestherelationshipbetweenexchangeratesandstockpricesisfarfromconclusive.Therearetwomaintheoriesthatrelatethesefinancialmarkets.Thefirstisthetraditionalapproach,whichconcludesthatexchangeratesshouldleadstockprices.Thetransmissionchannelwouldbeexchangeratefluctuationswhichaffectfirm’svaluesthroughchangesincompetitivenessandchangesinthevalueoffirm’sassetsandliabilities,denominatedinforeigncurrency,ultimatelyaffectingfirms’profitsandthereforethevalueofequity.1

Alternatively,changesinstockpricesmayinfluencemovementsinexchangeratesviaportfolioadjustments（inflows/outflowsofforeigncapital）.Iftherewereapersistentupwardtrendinstockprices,inflowsofforeigncapitalwouldrise.1Evenfirmsthatarenotinternationallyintegrated（lowratioofexportsandimportstototalsalesandalowproportionofforeigncurrency-denominatedassetsandliabilities）maybeindirectlyaffected.

However,adecreaseinstockpriceswouldinduceareductionindomesticinvestor’swealth,leadingtoafallinthedemandformoneyandlowerinterestrates,causingcapitaloutflowsthatwouldresultincurrencydepreciation.Therefore,undertheportfolioapproach,stockpriceswouldleadexchangerateswithanegativecorrelation.

InJanuary1999,Brazilabandonedthecrawlingpegandtargetzoneregimesandadoptedafloatingexchangerate.2FromJanuary14toMarch3,theBrazilianRealdepreciateddrastically,49.51%.TheBOVESPAIndex（theS˜aoPauloStockExchangeIndex,themostimportantstockindexinthecountry）increased4.097pointsinthesameperiod（59.34%rise）.ThiseffectonthedomesticstockindexisverydifferentfromthatobservedinAsianeconomiesatthestartoftheAsiancrisis.Therefore,theBraziliancaseprovidesaninterestingopportunitytostudythedynamicsbetweenstockpricesandexchangerates.

Therapidincreaseofthestockindexcouldhaveoccurredbecauseeconomicworldwidebelievedthatthecurrencywasovervalued,andthatdepreciationwouldleadtoanincreaseinfirmcompetitiveness,enhancingexportsandraisingprofits.Moreover,manyfirmsthatcomprisethestockindexhaveAmericanDepositoryReceipts（ADR）;thesestockpriceswouldrespondalmostimmediatelythrougharbitragemechanisms,since,withtherapiddepreciation,domestictradedstockswouldbeverycheapvis-a-vistheirADR.

Weanalyzethedynamicsbetweenthestockindexandtheexchangerateusinglinear,andnonlinear,Grangercausalitytests.Weemployseriesfilteredforvolatilityandlineardependencewhenperformingthenonlinearcausalitytests.Wemakeuseofnewlydevelopedunitrootandcointegrationtests,whichallowendogenousbreaks,totestforalong-runequilibriumrelationshipbetweenthesevariables.Furthermore,weuseimpulseresponsefunctionstotestthevalidityofboththetraditionalandportfolioapproaches.

Thispaperisorganizedasfollows.Inthenextsection,wepresentabriefliteraturereviewandthemainfindingsindevelopedandemergingcountries.Section3presentsthedataandmethodologyemployed.Section4showstheempiricalevidencefortheinterdependenciesbetweenstockpricesandexchangeratesinBrazil.Section5concludesthepaperandgivessomedirectionsforfurtherresearch.

2.LiteratureReview

Therelationshipbetweenexchangeratesandstockpricesisofgreatinteresttomanyacademicsandprofessionals,sincetheyplayacrucialroleintheeconomy.Nonetheless,resultsaresomewhatmixedastowhetherstockindexesleadexchange

ratesorviceversaandwhetherfeedbackeffects（bi-causality）evenexistamongthesefinancialvariables.

Campaetal.[11]studiedthecredibilityofthecrawlingpegandtargetzone（maxiband）regimesandhaveanicedescriptionoftheperiodpriortothemaxi-devaluationoftheRealin1999.DynamicRelationshipBetweenStockPricesandExchangeRates1379

Aggarwal[4]arguedthatchangesinexchangeratesprovokeprofitsorlossesinthebalancesheetofmultinationalfirms,whichinducestheirstockpricestochange.Inthiscase,exchangeratescausechangesinstockprices（traditionalapproach）.

Dornbusch[14]andBoyer[10]presentedmodelssuggestingthatchangesinstockpricesandexchangeratesarerelatedbycapitalmovements.Decreasesinstockpricesreducedomesticwealth,loweringthedemandformoneyandinterestrates,inducingcapitaloutflowsandcurrencydepreciation.

Bahmani-OskooeeandSohrabian[6]analyzedtherelationbetweenstockpricesandexchangeratesintheUSeconomy.Theyfoundnolong-runrelationshipamongthesevariables,butadualcausalrelationshipintheshort-runusingGranger[16]causalitytests.3Amihud[5]andBartovandBodnar[7]foundthatlagged,andnotcontemporaneous,changesinUSdollarexchangerates,explainfirmscurrentstockreturns.

Ratner[29]appliedcointegrationanalysistotestwhetherUSdollarexchangeratesaffectUSstockprices,usingmonthlydatafromMarch1973toDecember1989.Hisresultsindicatedthattheunderlyinglong-termstochasticpropertiesoftheUSstockindexandforeignexchangeratesarenotrelated,sincethenullofnocointegrationcouldnotberejected,evenwhendividingthesampleintosub-periods.

AjayiandMougou′e[3]analyzedtherelationshipbetweenstockpricesandexchangeratesineightadvancedeconomies（Canada,France,Germany,Italy,Japan,theNetherlands,theUnitedKingdomandtheUnitedStates）.4Usinganerrorcorrectionmodel,theyfoundsignificantshortandlongrunfeedbackbetweenthesetwovariables.

AbdallaandMurinde[1]investigatedinteractionsbetweenexchangeratesandstockpricesinIndia,Korea,Pakistan,andthePhilippines.UsingmonthlyobservationsintheperiodfromJanuary1985toJuly1994.Withinanerrorcorrectionmodelframework,theyfoundevidenceofunidirectionalcausalityfromexchangeratestostockpricesinallcountries,exceptforthePhilippines.There,theyfoundthatstockpricesGrangerinfluenceexchangerates.

OngandIzan[28]usedweeklydataof“spotand90-dayforward”exchangeratesforAustraliaandtheG-7countriesand“spotand90-dayforward”futurespricesforequitypricesinAustralia,Britain,FranceandtheUS,duringtheperiodfromOctober1986toDecember1992.Theywereunabletofindasignificantrelationship

betweenequityandexchangeratemarkets.Theysuggestedthattheuseofdailydata（orevenintra-day）couldimprovetheirempiricalresults.

Ajayietal.[2]useddailydataandreportedthatcausalityrunsfromthestockmarkettothecurrencymarketinIndonesiaandthePhilippines,whileinKoreaitrunsintheoppositedirection.NosignificantcausalrelationisobservedinTheyusetheS&P500,theeffectiveexchangerate,andmonthlydataovertheperiodfromJuly1973toDecember1988.TheirsamplerunsfromApril1985toJuly1991.HongKong,Singapore,Thailand,orMalaysia.However,inTaiwan,theydetectedbi-directionalcausalityorfeedback.Furthermore,contemporaneousadjustmentsaresignificantinonlythreeoftheseeightcountries.Indevelopedcountries,theyfoundsignificantunidirectionalcausalityfromstocktocurrencymarketsandsignificantcontemporaneouseffects.

Grangeretal.[17]foundstrongfeedbackrelationsbetweenHongKong,Malaysia,ThailandandTaiwan.TheyuseddailydataandtheirsampleperiodstartedJanuary3,1986andfinishedJune16,1998.Furthermore,theyfoundthattheresultsareinlinewiththetraditionalapproachinKorea,whiletheyagreewiththeportfolioapproachinthePhilippines.

NiehandLee[26]foundnosignificantlong-runrelationshipbetweenstockpricesandexchangeratesinG-7countries,usingboththeEngle-GrangerandJohansen’scointegrationtests.6Furthermore,theyfoundambiguous,andsignificant,shortrunrelationshipsforthesecountries.Nonetheless,insomecountries,bothstockindexesandexchangeratesmayservetoforecastthefuturepathsofthesevariables.Forexample,theyfoundthatcurrencydepreciationstimulatesCanadianandUKstockmarketswithaone-daylag,andthatincreasesinstockpricescausecurrencydepreciationinItalyandJapan,againwithaone-daylag.

Ingeneral,empiricalfindingssuggestthattherearenolong-runequilibriumrelationshipsbetweenthesetwofinancialvariables（exchangeratesandstockprices）inmostcountries.However,manystudieshavefoundthatthesevariableshave“predictiveability”foreachother,althoughthedirectionofcausalityseemstodepend

onspecificcharacteristicsofthecoun