Does Philippine peso exchange rate influence the volatility of the Philippine stock exchange index? A Granger causality analysis

• Main Author: Romero, Frederick P.
• Format: text
• Published: Animo Repository 2016
• Subjects: Foreign exchange rates > Philippines; Stock exchanges > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/3934
• Institution: De La Salle University

The paper analyzes the sensitivity of the overall movement of the Philippine Stock Exchange Index (PSEi) to the volatility of Philippine Peso. Monthly data of the Philippine Peso exchange rate and the PSEi price over the period 2005-2014 have been used for the study. The Augmented Dickey Fuller (ADF) was used for the test of stationary of the variables and LaGrange-Multiplier Test of ARCH Test and Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) for the tests of heteroscedasticity in the data. Granger Test for Causality was used to obtain the long-run relationship between the variables. In this study, it was found that the Philippine Peso has no substantial effect on the movement of stocks as represented by the PSEi. It is implied that the exchange rate does not have any relevant influence in forecasting the future movements the stock price. © 2016 International Information Institute.