The aim
of this study was to investigate the relationship between the exchange rate and
the stock market price in Zambia using the time series monthly data from2004 to
2016. To measure the stock market prices, we used LuSE overall index (LuSE
Index) and the exchange rate was measured using the Zambia’s Real Effective
Exchange Rate (REER). In order to establish the relationship between the
exchange rate and the stock market price, we employed the Vector Autoregression
(VAR)based
cointegration test methodology and Auto Regression distribution lag (ARDL)
bound tests. The Johansson cointegration test results revealed the existence of
the cointegration long run. However the Auto Regression distribution lag bound
tests show that its impact is statistically insignificant.The Vector Error Correction Model (VECM) revealed
that there is no short-run
relationship between the exchange rate and stock market prices. The findings of
this study have implications for academicians, policy makers and investors.
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