This paper investigates the dynamic relationship between stock prices and exchange rates for nine emerging markets using Autoregressive Distributed Lag (ARDL) and causality models from January 1998 to May 2014. The sample period subdivided in to two episodes to take in to account the interaction of these series during the tranquil and crisis periods. The findings indicates that the comovement between exchange rates and stock prices become stronger during the crises time, and the direction of causality originates from stock prices to exchange rates during the tranquil period; and from exchange rates to stock prices during crisis once. The result shows certain sensitivity to the level of stability in financial markets.
ISSN: 2241-0996 (Online)