Scaling of Dependence between Foreign Exchange Rates and Stock Markets in Central Europe

• Authors: L. Kristoufek
• Languages of publication: EN

Abstracts

EN

We propose two novel methodological approaches - the detrending moving average based regression coefficient estimator and the scale-dependent instrumental variable estimator - and show their utility on a specific case of dependence between stock markets and connected foreign exchange rates in the Central European region - the Czech Republic, Hungary, and Poland. The methodology has proven useful as we uncovered several interesting findings such as scale dependence of the shock transmission and differences between the Euro and U.S. dollar currency pairs. The Polish currency is also the most sensitive of the three with respect to the stock market shocks. The proposed methodology can be applied to any system with potential endogeneity issues if one is interested in the scale variability of the effect of interest.

Keywords

EN

05.45.Tp; 89.75.Da; 89.65.Gh

Discipline

• 05.45.Tp: Time series analysis
• 89.65.Gh: Economics; econophysics, financial markets, business and management(for economic issues regarding production and use of renewable energy, see 88.05.Lg)
• 89.75.Da: Systems obeying scaling laws

• Publisher: Institute of Physics, Polish Academy of Sciences
• Journal: Acta Physica Polonica A
• Year: 2016
• Volume: 129
• Issue: 5
• Pages: 908-912

Dates

published

2016-05

Contributors

author

L. Kristoufek

• Institute of Information Theory and Automation, The Czech Academy of Sciences, Pod Vodarenskou vezi 4, Prague CZ-18208, Czech Republic
• Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Opletalova 26, Prague CZ-11000, Czech Republic

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Identifiers

DOI

10.12693/APhysPolA.129.908