Analysis of the dynamic relationship between the exchange rate and the returns of the shares of the main and sectoral indices in the Egyptian stock market

Document Type : Original Article

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Department of Business Administration Faculty of Commerce Suez Canal University Suez Egypt

Abstract

  The Research aimed to study the dynamic relationship between the exchange rate and the returns of the shares of the main and sectoral indices in the Egyptian stock market. The research started to test two basic hypotheses related to the correlation relationship, the extent of the effect and the relationship between the variables of the study. The results also showed that there was a negative effect on the exchange rate and all the fluctuations in the returns of the main indicators and the number of ten specific sectors, of which seven sectors had a significant effect on them. The correlation between the independent variable and the fluctuations in the returns of the banking and construction sectors and the causal relationship showed that there was only one causal relationship between the EGX20, EGX70 and the specific sectors (food and beverages, Household and personal products, communications), while the oneway causal relationship starts from the EGX30 main index to the exchange rate. All results confirm that the Egyptian Stock Exchange is still suffering from weak information efficiency, which requires more corrective measures to ensure an efficient financial market.

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