Linkages between Excess Currency and Stock Market Returns:
Granger Causality in Mean and Variance.
This paper investigates the causal linkages between monetary and equity market integration of the new member states (NMS) as well as of the non economic monetary union (Non- EMU) member states with the euro zone, after the official launch of the euro. Granger causality in mean and in variance tests are utilized. Our results reveal a number of interesting facts that can be summarized as follows. Firstly, there is little evidence of causality in mean effects for all countries. Secondly, there are significant spill over effects for the NMS. Thirdly, the excess currency return is the chief variable which leads the excess stock market return volatility of the NMS. Our findings have obvious implications for both investors and policy makers.
||monetary market integration; equity market integration; Granger causality in-mean and in-variance; AR; Univariate GARCH;
||Social Sciences > Economics, Finance & Accounting
Ms Sandra Doherty
||15 Jun 2010 14:32
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