How currency crises impact on stock markets: a cointegration analysis

• Autor(a) principal: Oliveira, Tomás Miguel da Luz Correia Soares de
• Data de Publicação: 2020
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/21921
• topic: Currency crises; Stock markets; Time series; Cointegration; Crises cambiais; Mercados de ações; Séries temporais; Cointegração

This dissertation aims to study the impact of currency crises on stock markets and to conclude on the existence of cointegration relationships through the estimation of cointegrating equations using VECM models. Taking into account the currency crises of the Russian Ruble, Chinese Yuan, British Pound and the Turkish Lira, different samples were collected for each currency and subsequently divided in three time periods: the period before, during and after the currency depreciation. The dissertation analyses the connection between the daily results of the exchange rates and the stock indexes chosen from each country where the crisis occurred and from each continent (American, European and Asian indexes) in order to understand whether there is cointegration between the stock markets and the currencies studied. The results suggest the existence of interdependence between currency crises and stock markets, concluding that currency crises strengthened and reinforced the markets comovements. There is a greater proximity of Russia to European markets, the growth of the American and British markets lead to a strengthening of the Chinese Yuan against the Dollar and the Dollar against the Pound, respectively, Brexit had a greater impact on European markets than on British, most currencies had a slow recovery, currency crises had an impact on global markets and finally the FTSE 100 and Shanghai Composite Index after the currency crisis showed better results than in the period before the crisis, coming out stronger.