Dependence Structure of Equity and Foreign Exchange Markets

Abstract

The world economy has experienced a number of financial crises over the past 15 years. They placed significant impacts on various countries. This paper attempts to explain the reasons causing the co-movement of foreign exchange market with the stock market in the industrialized Asian economies, including Japan, Korea, and Singapore. We find that the relationship is stronger during the crisis period. Johansen cointegration test result also supports the strong linkage in trading activities between industrialized Asian economies and U.S.