Effect of Foreign Exchange Volatility on Returns from Stock Market: A Systematic Review
DOI:
https://doi.org/10.17613/nrz0-a797Keywords:
Foreign exchange Rate, Foreign Exchange Volatility, Stock Market, Stock Market Returns, Stock Market Performance, Systematic ReviewAbstract
In the context of economic globalization, particularly in the aftermath of the financial crisis, the stock market has witnessed unprecedented fluctuations. The study sought to examine the magnitude and direction of the effect of foreign exchange volatility on stock market returns. The study reviewed diverse range of journal articles by searching many databases, like Emerald Insight, Google scholar, ScienceDirect and from several publications. The keywords used to search the articles were “Foreign exchange volatility” and “Stock market” or “Stock market performance”. The researcher used these keywords, the databases hit the results of 558,464 (Emerald – 4,417, ScienceDirect – 15,047 and Google Sholar–539,000). Phase involved filtered searcher filtered the search results by selecting articles, journals, full text, scholarly (peer-reviewed) journals, after which it resulted in 25,279 articles (Emerald – 3282, ScienceDirect – 797 and google scholar – 21,200). The researcher conducted the database search between 28th November 2023 and 30th November 2023. To make sure that the articles selected were relevant to the study, the researcher prepared inclusion and exclusion criteria. Using this criterion, the researcher carefully examined the 25,279 articles where 25,004 articles were excluded after applying exclusion and inclusion criteria. After excluding, researcher found 275 articles eligible for inclusion. The researcher thoroughly studied these papers based on title, abstract, keywords, availability of full pdf text to identify their suitability. Further, duplicated papers were excluded leading to 21 papers being selected for review. The study established that country-wise relationship foreign exchange rate volatility and stock market was positive for some studies and inverse for other studies. Foreign exchange rate volatility tended to have positive impact on stock market returns for the majority of developed countries. In addition, the researcher noted that the majority of developing and emerging countries showed positive effect of foreign exchange volatility on stock market returns.
Downloads
References
Ahmad, Ibraheem, Ilu. (2020). Exchange Rate Pass through to Stock Prices: A Multi GARCH Approach.
Cao,H.(2023). The Market-Based Probability of Stock Returns. doi: 10.48550/arxiv.2302.07935
Fransiskus, X, Lara, Aba. (2018). The Influence of Exchange Rate and Inflation on Stock Return Volatility. Research Journal of Finance and Accounting, 9(18):139-145.
Guler, D. (2020). The impact of the exchange rate volatility on the stock return volatility in turkey. Eurasian Journal of Business and Management, 8(2), 106-123.
Hatem, B. S. (2017). How can we measure stock market returns? An international comparison. International Business Research, 10(5), 121-126.
He, X., Gokmenoglu, K. K., Kirikkaleli, D., & Rizvi, S. K. A. (2023). Co‐movement of foreign exchange rate returns and stock market returns in an emerging market: Evidence from the wavelet coherence approach. International Journal of Finance & Economics, 28(2), 1994-2005.
Hung, N. T. (2022). Spillover effects between stock prices and exchange rates for the central and eastern European countries. Global Business Review, 23(2), 259-286.
Keshtgar, N., Pahlavani, M., & Mirjalili, S. H. (2020). The impact of exchange rate volatility on banking performance (case of Iran). International Journal of Business and Development Studies, 12(1), 39-56.
https://doi.org/10.22111/ijbds.2020.5436.
Kuhe, D. A., Aarga, J. T., & Ayigege, I. T. (2018). Modeling Volatility of Exchange Rates Returns in the Nigerian Foreign Exchange Market in the Presence of Non-Gaussian Errors. Nigerian Annals of Pure and Applied Sciences, 1, 246-258. doi: 10.46912/NAPAS.31
Dewanti, L. A., Rusmita, S. A., & Abd Samad, K. (2022). Sensitivity islamic stock return in asia: the effect of exchange rate volatility. Journal of Islamic Economics and Business, 8(2):302-317. doi: 10.20473/jebis.v8i2.39018
Liu, Z., Dashti Moghaddam, M., & Serota, R. A. (2019). Distributions of historic market data–stock returns. The European Physical Journal B, 92, 1-10.
Manu, K. S., & Bhaskar, P. (2018). Effect of exchange rates volatility on stock market performance. Asian Journal of Management, 9(4), 1337-1341. doi: 10.5958/2321-5763.2018.00212.3
Alenezi, M., Alqatan, D. A., & Phiri, O. (2020). The sensitivity of GCC firms’ stock returns to exchange rate, interest rate, and oil price volatility. Corporate Ownership and Control, 17(4):35-50. doi: 10.22495/COCV17I4ART3
Md., Mahfuzur, Rahman, Khan. (2020). Factors influencing Decisions of Investors to invest in Stock Market: Evidence from Dhaka Stock Exchange. doi: 10.46568/KUBRJ.V1I2.21
Mishra, A. (2019). Crude oil, stock market, and foreign exchange return volatility and spillover: A GARCH DCC analysis of Indian and Japanese financial market. International Journal of Business Innovation and Research, 20(1), 25-46.
Nenavath, Sreenu. (2023). Effect of Exchange Rate volatility and inflation on stock market returns Dynamics - evidence from India. International Journal of Systems Assurance Engineering and Management, doi: 10.1007/s13198-023-01914-3
Nesrine, Mechri., Salah, Ben, Hamad., Christian, Peretti. (2019). The Impact of the Exchange Rate Volatilities on Stock Market Returns Dynamic. Research Papers in Economics,
Ngo Thai, H. (2019). Dynamics of volatility spillover between stock and foreign exchange market: empirical evidence from Central and Eastern European Countries. ECONOMY AND FINANCE: ENGLISH-LANGUAGE EDITION OF GAZDASÁG ÉS PÉNZÜGY, 6(3), 244-265.
Olkhov, V. (2023). The Market-Based Probability of Stock Returns. arXiv preprint arXiv:2302.07935.
Rizwan, Ali., Inayat, Ullah, Mangla., Ramiz, Ur, Rehman., Wuzhao, Xue., Muhammad, Akram, Naseem., Muhammad, Ishfaq, Ahmad. (2020). Exchange Rate, Gold Price, and Stock Market Nexus: A Quantile Regression Approach. 8(3):86-. doi: 10.3390/RISKS8030086
Sirikwan, Jaroenwiriyakul. (2019). Trilateral relationship among foreign exchange rates, oil prices, and stock returns in thailand: a dynamic approach. 10(1):145-156.
Sreenu, N., Rao, K. S., & Naik, S. (2022). Impact of Exchange Rate and Inflation Rate on Stock Market Return Volatility in India. Academy of Marketing Studies Journal, 26, 1-11.
Sukmayana, D., Purnamasari, L., & Ikhsan, S. (2022). Impact of Macroeconomic Movements on Changes in Stock Returns. International Journal of Social Science and Business, 6(4), 462-468.
Tabash, M. I., Farooq, U., Safi, S. K., Shafiq, M. N., & Drachal, K. (2022). Nexus between Macroeconomic Factors and Economic Growth in Palestine: An Autoregressive Distributed Lag Approach. Economies, 10(6), 145.
Bouazizi, T., Mrad, F., Hamida, A., & Nafti, S. (2022). Effects of Conditional Oil Volatility on Exchange Rate and Stock Markets Returns. International Journal of Energy Economics and Policy, doi: 10.32479/ijeep.12826.
Bhargava, V., & Konku, D. (2023). Impact of exchange rate fluctuations on US stock market returns. Managerial Finance, doi: 10.1108/mf-08-2022-0387
Wasiaturrahma, W., Putri, D. N., & Ajija, S. R. (2020). Impact of Exchange Rate Volatility to Stocks’ Return in Indonesia: The Augmented Markov-Switching Egarch Approach. Journal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 21(2):161-173. doi: 10.23917/JEP.V21I2.8781
Odiche, W. (2022) (2022). An interplay of oil price volatility, exchange rate and stock returns in Nigeria. Journal of global economics, management & business research, 24-38. doi: 10.56557/jgembr/2022/v14i38048
Published
Issue
Section
License
Copyright (c) 2024 Michael Ochieng Obuya , Franciscah Kitheka, Victor Achola Ademba , Dorcas Njoki Mungai (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
How to Cite
