The relationship between stock prices and the FX market

Abstract

This study examines the relationship between foreign exchange market and the stock market in a group of advanced countries, Canada and Japan and a part of emerging countries Brazil and India over the period of 2002-2017. The whole research was carried out by applying the methods of unit root tests for stationarity, cointegration tests for the long run relationship between the two markets, the Granger causality test in order to explain the relationship in the short run period, Impulse Response Function which analyzes the response of the variables to shocks and Variance Decomposition analysis.