Investigating the Relationship between Dow Jones Industrial Average and USD/JPY Exchange Rate

• Main Authors: Chiu-Lin Chen, 陳秋玲
• Other Authors: Chien-Chung Nieh
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/83202386739540453198

碩士 === 淡江大學 === 財務金融學系碩士在職專班 === 97 === The relationship between equity market and foreign exchange market has always received considerable amount of attention from the economists, international investors and policy makers. This study employs various linear and non-linear, time-series methodologies to investigate the short-term and long-term relationships between Dow Jones Industrial Average Index and USD/JPY exchange rate during the period of January 1998 to August 2008. It is found that from both conventional ADF, PP, and NP tests and advanced KSS test,these two variabls are insured I(1) non-stationary time series; we also find there is significant co-intergation relationship between Dow Jones Index and USD/JPY; in another words, there is a long-run equilibrium relationship between Dow Jones Index and USD/JPY in time series. The results from Granger-Gausality test based on corresponding TECM (Threshold Error-Correction Model) clearly point out there do exist a bidirectional causality running from Dow Jones Industrial Average Index to USD/JPY exchange rate in the long run; but there is no significant lead-lag causal relationship found between Dow Jones Index and USD/JPY in the short run. This study might be valuable for those who are participating in equity market or foreign exchange market and policy makers.