Journal of Statistical and Econometric Methods

On the Co-movements between Exchange Rate and Stock Price from Japan: A Multivariate FIGARCH-DCC Approach

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• Abstract
  
  

  This paper aims to investigate the inter-dependence of exchange rate and stock index from Japan. For this purpose, we use a dynamic conditional correlation (DCC) model into a multivariate Fractionally Integrated Exponential GARCH (FIGARCH). Framework takes account long memory and time varying correlations. Our findings reveal time-varying Co-movements evidence, a high persistence of conditional correlation and dynamic correlations revolve around a constant level. The findings support the idea of cross-market hedging and sharing of common information by investors.

   

  JEL classification numbers: C51, C58, F31, G12.

  Keywords: Exchange rate, Stocks, DCC-FIAPARCH, Japan.