Consequences to the Stock Market Caused by Currency Fluctuations: Jordanian Evidence

Abstract

Purpose: The aim of this study is to examine the fluctuations in currency exchange in the stock market, as it relates to the Jordanian market. Theoretical framework: The study's main goal is to identify how Jordanian SMR changes in currency exchange are influenced. Thus, the rational expectations theory has been used in this study. This theory illustrates three key aspects that influence the decision to participate in the stock market, including the availability of information, prior experience, and human reason. Design/ methodology/approach: The study incorporates the quantitative design, in which, information was extracted from secondary sources i.e. Investing.com. The information has been compiled considering the exchange rates, stock market returns, and cotton prices, beginning in 2015 and ending in 2020. The analysis has been conducted with Granger Causality test, VAR, and ADF. Findings: The results of this study concludes that fluctuations of exchange rates do not impact changes in cotton prices and the returns of the Jordanian stock exchange. Research, Practical & Social implications: The study is limited to Jordan, as only Jordan’s cotton price and stock market return data have been gathered. In addition, the time period of consideration of data is confined from 2015 to 2019, limiting the study’s scope. Originality/Value: The study uses sensitivity analysis to investigate the robustness of the impacts of fluctuations in currency exchange in the stock market, as it relates to the Jordanian market.