Fractional integration and cointegration in stock prices and exchange rates

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Auteurs
Date

2010

Discipline
Type de document
Périmètre
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Identifiants
Source

HAL-SHS : économie et finance

Collection

Archives ouvertes

Organisation

Centre pour la communication scientifique directe

Licence

info:eu-repo/semantics/OpenAccess

Mots-clés En

fractional cointegration long memory stock prices exchange rates

Sujets proches En

Fixed exchange rates Exchange rates Fluctuating exchange rates Flexible exchange rates Rates of exchange Foreign exchange--Rates Floating exchange rates Stock prices

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Marcel Aloy et al., « Fractional integration and cointegration in stock prices and exchange rates », HAL-SHS : économie et finance, ID : 10670/1.ibhlbq

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This paper examines the relationships between the CAC40 index, the Dow Jones index and the Euro/USD exchange rate using daily data over the period 1999-2008. We find that these variables are I(1) nonstationary series, but they are fractionally cointegrated: equilibrium errors exhibit slow mean reversion, responding slowly to shocks. Therefore, with regard to the recent empirical cointegration literature, taking into account fractional cointegration techniques appears as a promising way to study the long-run relationships between stock prices and exchange rates.

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