The quantile regression analysis of the relationship between Taiwan stock market and foreign exchange market

• Main Authors: Yen-mou Fang, 方彥茂
• Other Authors: Ming-Yuan Leon Li
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/20825764476613215236

碩士 === 國立成功大學 === 財務金融研究所 === 97 === Previous researches had showed two effect about the NT dollar exchange rate volatility to the return of Taiwan Weighted Stock Index. In the short run, there is positive effect between the two factors which is affect by the flow of hot money. In the long run it is negative effect which is affected by the export competition. The used linear regressions estimated by the ordinary least square method (OLS) only can describe “average” degree between the factors and can’t appear the whole possibility in every situation. This research examine the relationship between the NT dollar exchange rate volatility and the return of Taiwan Weighted Stock Index using quantile regression(QR) The empirical result show that there is a significantly positive relationship between stock market and foreign exchange market. However, although the two markets are positively correlated, the magnitude of the co-movement between them will significantly change across various quantile levels. In particular, the estimate is considerably large when the lower quantiles are concerned (i.e., the large fall in stock price). In other words, when Taiwan stock market experience a bear market condition, the linkage with foreign exchange market is much stronger.