Examining the uncovered equity parity in the emerging financial markets

Aftab, Muhammad and Ahmad, Rubi and Ismail, Izlin (2018) Examining the uncovered equity parity in the emerging financial markets. Research in International Business and Finance, 45. pp. 233-242. ISSN 0275-5319

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Official URL: https://doi.org/10.1016/j.ribaf.2017.07.154

Abstract

Uncovered Equity Parity condition states that the foreign equity market outperformance relative to the home equity market associates with foreign exchange rate depreciation. This study examines this condition in the emerging financial markets context using bounds testing approach to the level relations. Our rigorous analysis shows an evidence opposite to the UEP prediction such that an outperformance of foreign equity market links with a foreign exchange rate appreciation. Moreover, a nonlinear model shows an asymmetry in the equity market effect on the exchange rate, both in the short run and long run.

Item Type: Article
Uncontrolled Keywords: Exchange rate movements; International returns; Portfolio rebalancing
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Business and Accountancy > Dept of Finance and Banking
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 08 Oct 2019 02:20
Last Modified: 08 Oct 2019 02:20
URI: http://eprints.um.edu.my/id/eprint/22695

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