Relationship between exchange rate and stock price: The case study in Ho Chi Minh Stock Exchange (HOSE)

Abstract

This study investigates relationship between exchange rate and stock market by performing main model Vector Autoregression Model (VAR) at first difference. The model is applied on monthly data of 97 observations on Ho Chi Minh exchange stock price and real exchange rate during the period form Sep 2006 to Sep 2014. The study finds there is no existence of a relationship between the exchange rates and stock price because some companies have advantages and some companies have disadvantage from the change of exchange rate, which make the VN-index is saturated. In addition, there are the other factors affecting to the market. Some recommendations are suggested to help investors more clearly about the overall picture of stock market and have suitable strategies for investment portfolio in current time.