The Impact of the Exchange Rate Volatilities on Stock Market Returns Dynamic

Nesrine Mechri (1) , Salah Ben Hamad (1) , Christian De Peretti (2)

1 FSEG Sfax - Faculté des Sciences Economiques et de Gestion de Sfax
2 UO - Université d'Orléans

The present research provides an overview of the interactions and links between exchange rate volatility and the dynamics of stock market returns in order to clarify the relationship between this variables for managers and investors who will be able to control better the portfolio risk level. This research aims to identify the impact of both exchange rate and relative prices uncertainty on the fluctuations of stock markets prices, considering two countries that belong to MENA zone. The GARCH model is applied to measure the volatility of our variables and implemented a multiple regression model to determine the impact of exchange rate and relative prices fluctuations as well as their volatilities on stock market volatility using Monthly data. In this work, several determinants of stock market indices are integrated in our empirical examination that have not been used simultaneously before, hence, the results show that in the case of Tunisia, exchange rate volatility have a significant effect on stock market fluctuations, as well as the volatility of the Gold and the oil prices, which are significant. Alternatively, in Turkey both the volatilities of the exchange rate and gold prices have an influence on the dynamics of the stock market returns and the fluctuation of the interest rate as well, while other prices are statistically non-significant. J.E.L. classification: F31, F62, F65, G15

Mots clés: Stock market return; Nominal exchange rate; Stock market; Volatility; GARCH 2; MENA

Domaines: Finance [q-fin.GN]

Nesrine Mechri, Salah Ben Hamad, Christian De Peretti. The Impact of the Exchange Rate Volatilities on Stock Market Returns Dynamic: Evidence from Tunisia and Turkey. 2019. ⟨hal-01766742v2⟩