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    Stock Market and Foreign Exchange Market: An Empirical Guidance
    Stock Market and Foreign Exchange Market: An Empirical Guidance
    Stock Market and Foreign Exchange Market: An Empirical Guidance
    Ebook85 pages59 minutes

    Stock Market and Foreign Exchange Market: An Empirical Guidance

    By Ian Charles Robert Gracias

    ()

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    About this ebook

    Stock market investors trade securities that fluctuate based on a variety of factors. But the exchange market is a currency mechanism, and it is not subject to the same regulations and factors that make stock prices go up or down. Ian Charles Robert Gracias, a senior technical analyst and commodity and foreign exchange market trader, explores how stock markets and foreign exchange markets work in this book. He highlights topics such as: • economic indicators that affect the performance and operation of exchange rates; • direct and indirect ways that stock markets and exchange rates affect economic growth rates; and • ways individual investors can bolster returns by understanding how stock markets and exchange rates work Gracias pays particular attention to the stock markets and exchange rate markets in the United Kingdom and in the United States of America, examining the relationship between the FTSE 100 index and the NASDAQ 100 index as well as correlative patterns.
    LanguageEnglish
    PublisherLulu Publishing Services
    Release dateJan 17, 2018
    ISBN9781483470719
    Stock Market and Foreign Exchange Market: An Empirical Guidance

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      Book preview

      Stock Market and Foreign Exchange Market - Ian Charles Robert Gracias

      GRACIAS

      Copyright © 2017 Ian Charles Robert Gracias.

      All rights reserved. No part of this book may be reproduced, stored, or transmitted by any means—whether auditory, graphic, mechanical, or electronic—without written permission of the author, except in the case of brief excerpts used in critical articles and reviews. Unauthorized reproduction of any part of this work is illegal and is punishable by law.

      ISBN: 978-1-4834-7072-6 (sc)

      ISBN: 978-1-4834-7071-9 (e)

      Library of Congress Control Number: 2017908442

      Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

      Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

      Certain stock imagery © Thinkstock.

      Lulu Publishing Services rev. date: 12/5/2017

      Dedication for this book.

      I dedicate this book to my mother Marina Eugenia Nita Gracias, and late father Maurice Joseph Manoel Gracias who both encouraged me to keep studying at any age and follow my dream, I would not be the person i am today if it were not for their support and encouragement.

      They often reminded me that dreams can turn to reality, so make it happen.

      Acknowledgements

      I would like to thanks the following people :

      The Daily FX educational department – Jeremy Wagner ,Richard Krivo, James Stanley, and Tom Long, I had initially learnt about trading the Forex markets, which gave the initial interest in Finance.

      FX Trader’s EDGE – Jody Samuels - I took the flagship Elliott Wave Ultimate Course.

      While doing the course, it gave me the confidence and motivation to trade the Forex markets, and to study for a Masters Degree in Finance, which finally resulted in this book.

      Mrs Pooja Jai Anam – CFA Institute India

      DR . Jaspreet Kaur

      Asst Professor,

      Dayalbagh Educational Institute,

      Agra

      India

      Both had helped me in the journey of subject Finance.

      Mohamed Hoque my first Finance tutor who supported me in my understanding of all subjects of Finance.

      Abstract

      This book evaluates the relationship between the stock markets and exchange rate markets in the United Kingdom and in the United States of America. In order to determine the relationship between the FTSE 100 index and the NASDAQ 100 index, the regression between the independent and dependent variables has been used. The results revealed that the relationship of FTSE returns was seen with all the exchange rates against GBP, but the extent of relationship was strong only in three currencies: GBP/AUD, GBP/YEN, and GBP/CAD. Similarly, the relationship of NASDAQ 100 returns with those of currencies against GBP was found to be strong in three currencies and weak with other three currencies. It was seen that an asset market approach was found to be relevant in the models where a strong exchange rate relationship with stock returns was seen.

      Introduction

      Different studies show a variety of relationships between stock markets and foreign exchange markets. Foreign exchange markets and stock markets are two different aspects and factors that are controlled not by a single factor but by various direct and indirect factors. These two are found to play a significant role, both toward the investors and building the economy strong.

      The investors in the stock market trade in different securities, where the investments are derived from various other factors, influencing the stock prices. The exchange rate market is a currency mechanism, whereas the stock market is a place but need not be a physical place where shares are bought and sold. The stock markets are highly regulated by the regulators, whereas the exchange rates do not experience the similar regulatory mechanism. Additionally, the stock markets are mainly affected by the market factors, firm factors, and other regulatory factors. On the contrary, the exchange rates are mainly influenced by the economic indicators that directly or indirectly affect the performance and operation of exchange rates. In other words, there is no strong and stable mechanism that has a control monopoly over the movement of exchange rates. Because the economy comprises two basic indicators (namely, exchange rate and stock markets) that directly or indirectly enhance the economic growth of the country, the in-depth relationship can be understood by examining the functioning of these two factors and their relationship. Hence it becomes important to examine the understanding of this relationship, which can enhance the returns to both the investors and the economy.

      Stock Market

      The stock market is a medium where buying and selling of shares or stocks are carried out (Buehler and Kohut 2006). These can be divided into components—namely, primary market and secondary market. In the primary market, new securities are issued by the company through IPO, private placement, in order to obtain funds from the public. Specifically, institutional investors are major players in

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