Exploring the Dynamic Correlations Between Stock Market Indexes and Exchange Rates: During- And Post-Crisis Insights from USA, Japan, China, England, and Thailand

The study aims to investigate the dynamic correlations between stock returns of various currency pairs and their corresponding exchange rates against the USD, covering currency and stock returns of China, Great Britain, Japan, Singapore, Thailand, and the US, using the daily returns between 3 January 2012 to 30 June 2023. Employing statistical tests, the analysis established non-normality and high volatility persistence in the data. The EGARCH(1,1) model with GED distribution was found to best capture the data’s characteristics. During the COVID-19 pandemic, conditional correlations showed relative stability, but volatility increased significantly for most variables. The Russian invasion of Ukraine also triggered widespread volatility, emphasizing geopolitics’ impact on currency and stock returns. The study highlights the interconnectedness of global financial markets and the US’s sensitivity to both the pandemic and geopolitical events, leaving a distinct mark on financial correlations.