Evidence on the dynamic relationship between international trade and the stock market: The Four Asian Tigers

This study uses vector autoregressive analysis to examine the dynamic interactions of monthly real stock returns, return volatility, exchange rates, export growth and import growth for Hong Kong, Korea, Singapore, and Taiwan for the period 1975-91. We find that exports and imports have significant i...

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Bibliographic Details
Published in:The journal of international trade & economic development 1995-07, Vol.4 (2), p.171-183
Main Authors: Fung, Hung-Gay, Lo, Wai-Chung, Leung, Wai K.
Format: Article
Language:English
Subjects:
Asia
Granger-causality
International trade
return volatility and international trade
Stock exchange
stock returns
Vector autoregressive analysis
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Summary:This study uses vector autoregressive analysis to examine the dynamic interactions of monthly real stock returns, return volatility, exchange rates, export growth and import growth for Hong Kong, Korea, Singapore, and Taiwan for the period 1975-91. We find that exports and imports have significant interactions. The results also indicate that stock returns in Hong Kong and Singapore Granger-cause trade flows. Return volatility is found to react strongly to trade news in all four countries, a result supporting the efficient-market hypothesis.
ISSN:0963-8199
1469-9559
DOI:10.1080/09638199500000015