Acta Univ. Agric. Silvic. Mendelianae Brun. 2004, 52, 145-160

https://doi.org/10.11118/actaun200452060145
Published online 2015-02-22

Changes in the USD/EUR exchange rate and their impact on the return of stock indexes from the viewpoint of a european and of an american investor

Oldřich Rejnuš, Oldřich Šoba

Ústav financí, Mendelova zemědělská a lesnická univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika

This article tries to analyse the impact of changes in the USD/EUR exchange rate on the return of stock indexes. We deal with investments on the American and on the European stock market made by European investors (investing in EUR) and by American investors (investing in USD) simultaneously on both these markets in the period of the last ten years. The investments are analysed from the viewpoint of five different investing periods with a common date of termination on 31 December 2003.
Using correlation coefficients, we have quantified the dependence between the development of relative weekly changes in the USD/EUR exchange rate and of relative weekly changes in the value of both indexes converted to the investor’s home currency in different time periods. We have also quantified the dependence between the development of relative weekly changes in the value of both indexes under study expressed in their original currency and after conversion to the investor’s home currency.
The analysis has shown that even in periods of considerable exchange rate fluctuation, the development of stock market rates had a significantly greater impact on the return of stock indexes than the development of the two currencies’ exchange rates.

References

4 live references