Abstract
By an ARIMA approach and verified by the Granger causality tests, the causality of daily interest rate, exchange rate and stock prices in Hong Kong were explored for the period 1986 to 1991. Depending on the subperiods being considered, sporadic unidirectional causality from closing stock prices to interest rate, and weak bi-directional causality between stock prices and the exchange rate were found. The overall evidence, however, appears to show that the Hong Kong market efficiently incorporated much of the interest rate and exchange rate information in its price changes both at daily market close and open.
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