This paper studies the relatedness and the model construction of exchange rate volatility and the Thailand's stock market returns with a factor of U.S. stock market returns. Empirical results show that we can construct a bivariate IGARCH(1, 1) model with a dynamic conditional correlation (DCC) to analyze the relationship of exchange rate volatility and Thailand's stock market returns. The average estimation value of the DCC coefficient for these two markets equals to -0.1506, this result indicates that the exchange rate volatility negatively affects the Thailand's stock market. Empirical result also shows that there do not exist the asymmetrical effect on the exchange rate and Thailand's stock markets. And the U.S. stock return volatility truly affects the variation risks of the exchange rate and Thailand stock markets. Based on the viewpoint of DCC, the bivariate IGARCH(1, 1) model with a DCC has the better explanation ability compared to the traditional bivariate GARCH(1, 1) model.
2010 International Conference on Internet Technology and Applications，起迄日：2010/08/21~2010/08/23，地點：武漢