Exchange Rate Volatility Impact on the Earnings of JSE Listed Stock Prices
ABSTRACT This study contributes to a better understanding of the relationship between the impact of exchange rate fluctuation and the earnings of JSE listed firms, using high-frequency weekly data from between January 2006 to December 2016. The study utilises the vector auto-regressive models, Granger causality, and impulse responses to evaluate the nexus between earnings of the JSE All Share, Resource 10, Financial 15, Industrial 25, and the Top 40 indices and fluctuations of the Rand/US dollar exchange rates. Our findings show unidirectional causality from the JSE All Share and TOP40 returns to the Rand/US dollar fluctuations. The impulse response of the Rand/US dollar fluctuation to the one standard deviation shock from the JSE indices returns is short-lived and different from sector-to-sector. The short-lived impulse response of the Rand/US dollar fluctuation could indicate that foreign investors are after the hot money in the relatively attractive JSE stock market thus inducing high volatility as they enter the markets for relatively short periods. Keywords: Granger causality; impulse response function; vector autoregressive model.
Johannesburg Stock Exchange, Stocks -- Prices, Foreign exchange rates -- South Africa,Finance -- Mathematical models.