Dynamic Asymmetric Effect of Currency Risk Pricing of Exchange Rate on Equity Markets: A Regime-Switching Based C-Vine Copulas Method

This paper investigates whether currency risk is priced differently in the different sectors (industrial, financial, and basic materials) of equity markets a sample developed United States America (USA) developing economies (Brazil, India, Poland, South Africa). The makes use following techniques: (i) Univariate Autoregressive Fractionally Integrated Moving Average Exponential General Conditional Heteroskedastic (ARFIMA-EGARCH), (ii) Markov Switching method (MS), (iii) Canonical Vine Copulas (C-Vine) techniques. Using daily data made foreign exchange rate against domestic market sectors; our findings show that there an asymmetry effect between rate: heterogeneous, strong, positive dependence two. Higher prices are associated with depreciation local currencies, according to US dollar (USD) rates. In addition, we find selected emerging pricing considerable risk. has varied both regimes representing states economy. fact, when beneficial impact on certain economy, investors predict better returns.