Exchange rate regimes and stock return volatility: some evidence from Asia’s silver era

Abstract

We study the impact of switching between silver, gold, and paper money standards on stock returns from seven small open economies from 1873 to 1941. Paper currency regimes are often associated with higher stock market volatility and higher correlations between markets. Indicators of global economic activity and export commodity prices typically explain a greater fraction of stock return behavior than currency related factors. There is little evidence that adoption or abandonment of the traditional currency, silver, has an impact on stock return volatility and cross-market correlation.