International Capital Flows and Dynamic Changes in Pfizer Stock Prices: A Long-term Perspective

Abstract

The stock and exchange rate markets play central roles in domestic and international trade. Since volatility of either one of them can bring significant impact to any business. It is essential to find how changes in exchange rate influence the stock market so that policymakers can build appropriate regulations to boost the national stock market, and investors may invest by taking the minimum risk. This paper selects the stock of a well-known multinational firm, Pfizer, and the US dollar index from October 27, 2005, to September 5, 2019. It applies the ADF test to validate the stationarity of the sample data, the VAR model with IRF to investigate whether the increasing exchange rate brings a positive effect on Pfizer's stock return or not, and the ARMA-GARCHX model to study whether the volatility of exchange rate is significant to changes of Pfizer's stock return in the long run. The study's findings indicate that the exchange rate volatility does not have a long-term relationship with Pfizer's stock price.