Time-frequency relationship between share prices and exchange rates in India: Evidence from continuous wavelets

摘要

The paper examines the relationship between exchange rates and share prices using the wavelets approach, and more specifically the continuous wavelet power spectrum, cross-wavelet transform, and cross-wavelet coherency. Our results, based on Indian data, lend support to the traditional (Am Econ Rev 70:960-971,1980) as well as the new portfolio hypothesis (Am Econ Rev 83:1356-1369, 1993), albeit over different time periods and across different time scales. The wavelet approach used in the paper has helped to uncover some interesting economic relationships within the time-frequency domain which have remained hidden thus far.