Asymmetry cointegration between the value of the dollar and sectoral stock indices in the U.S

•Asymmetry effects of exchange rate changes on S & P 500 index is done before.•Those effects are found to be only short run.•In this paper we consider stock indices of 11 sectors in the U.S.•We find short-run asymmetry effects of exchange rate changes in 10 sectors.•Short-run effects last into long run asymmetry effects in six sectors.

Previous studies that have investigated the effects of exchange rate changes on stock prices, have assumed that such effects are symmetric. Recently, one study addressed the asymmetric effects of exchange rate changes on the S & P 500 index using U.S. data and showed that exchange rate changes have asymmetric effects on the S & P 500 index in the short run but not in the long run. Suspecting that such findings could suffer from aggregation bias, in this paper we investigate the asymmetric effects of exchange rate changes on the stock price indices of eleven different sectors in the U.S. Using asymmetry cointegration and nonlinear ARDL approach, we find that changes in the nominal effective exchange rate of the dollar has significant asymmetric effects in the short run in ten sectors. These effects last into the long run asymmetric effects in six of the eleven sectors. In five of these six sectors, while dollar depreciation has a positive impact on their share prices, dollar appreciation does not.