The Dynamic Relationship between the Exchange Rate of the Yen/USDand the Stock Prices in the Financial Market of United States Public

Zong, Jishu (2009)

Permanent URL: https://etd.library.emory.edu/concern/etds/v692t682b?locale=fr
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Abstract

This paper studies the relationship between U.S. stock prices and the exchange rate of the Japanese Yen to the U.S. Dollar. The motivation is to establish the causal relation between the performance of the U.S. stock market and the value of the Yen/USD in the foreign exchange market. Time series techniques include, the ADF test, the Cointegration test and the Vector Error Correction Model, are applied using the daily data from January 1, 2003 to January 1, 2006. The empirical results suggest a long run relationship between changes in U.S. stock prices on the previous trading day and the current exchange rate of the Yen/USD.This leads to the conclusion that U.S. stock prices hold a predictive power over the exchange rate of Yen/USD.

Table of Contents

Figure 1: Change in U.S. and Japan stock prices and the Yen/USD exchange rate 7

Table 1: ADF and DF-GLS unit root tests 11

Table 2: Engle-Granger cointegration test 12

Table 3: VECM for U.S. stock market indices and the Yen/USD exchange rate 13

Table 4: Pairwise Granger Causality Tests 13

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