Browsing by Author "Perera, L. A. D. K. S."

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    Impact of Exchange Rate Movements on Stock Market Volatility: Evidence from Asian Emerging Markets
    (Department of Finance, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka., 2025) Perera, L. A. D. K. S.; Kethmi, G. A. P.
    Introduction: Financial markets are important aspects of the world's economy while the stock market is a vital component of the financial market where shares of publicly listed companies are bought and sold. Stock market volatility is influenced by various factors, making it a key concern for participants. Among the factors that impact stock market exchange rate has a major impact. Focusing on emerging markets may provide more insightful results compared to developed markets. Emerging markets are more vulnerable to changes in the exchange rate, due to their heavy reliance on exports and foreign investments. The main objective of the study to investigates and compares the country-specific impact of exchange rate movements on stock market volatility in Asian emerging markets. Methodology: The independent variable of the study is exchange rate and dependent variable is stock market return volatility. This consists of daily stock market closing prices and daily USD exchange rates for China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan, and Thailand for a period of six years from 2018 to 2023. Stock indexes include SSE, BSE Sensex, JKSE, KOSPI, KLCI, PSEI, Taiwan Weighted, and SET. Data were sourced from Investing.com and Analyzed the data using EViews. Granger Causality Test and The Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model were used as data analysis techniques. Findings: The GARCH results confirm a significant impact of exchange rate movements on stock market volatility across all analyzed Asian emerging markets. In China, Korea, Malaysia, and Indonesia, the exchange rate coefficient is significant and negative, indicating that currency appreciation or stability reduces stock market volatility. Conversely, in India, Taiwan, Thailand, and the Philippines, the exchange rate coefficient is significant and positive, suggesting that exchange rate fluctuations increase stock market volatility. These findings underscore that exchange rate movements significantly impact stock market volatility in Asian emerging markets, with varied effects across countries. Conclusion: These findings underscore that exchange rate movements significantly impact stock market volatility in Asian emerging markets, with varied effects across countries. The empirical findings of this paper provide valuable insights for local as well as foreign investors regarding their equity investments while the findings are also appealing to the policy makers in devising monetary policies.