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Research Article |

Copula Analysis of Dependencies Between Extreme Exchange Rates and NSE20 Price Index

Exchange rates within an economy affect international trade as they influence the price of goods and services sourced from another country and the attractiveness of the local produce to international consumers. This brings forth an interdependence relationship between exchange rates and market value of share products listed in Security Exchange Markets. This study evaluates the dependence structure between extreme exchange rates of the Kenyan Shilling against the US Dollar and the Nairobi Securities 20 price index using archimedean copulas. The Peak Over Threshold method was used to determine extreme values of the daily log returns of the KSH/USD exchange rate whose dependence structure was analyzed against the NSE20 price index. Parameter Estimation was via the Maximum log-Likelihood Estimation technique. Descriptive statistics showed that the minimum and maximum Ksh/Usd exchange rates were at Ksh. 79.44 and Ksh. 116.07 respectively. The highest NSE 20 price index was at Ksh.5500 with the lowest value of Ksh. 1724. This study found a negative correlation between Ksh/Usd extreme exchange rate data and the NSE20 price index. The Clayton copula was found as the best archimedean copula in modeling the dependence structure as it had the lowest standard error and a parameter estimate close to zero.

Extreme Value, Copula Analysis, Exchange Rates, NSE20 Price Index, Clayton Copula, Archimedean Copula

APA Style

Rosemary Wanjiru Ng’ethe, Thomas Mageto, Joseph Mungatu. (2023). Copula Analysis of Dependencies Between Extreme Exchange Rates and NSE20 Price Index. International Journal of Data Science and Analysis, 9(3), 50-59. https://doi.org/10.11648/j.ijdsa.20230903.11

ACS Style

Rosemary Wanjiru Ng’ethe; Thomas Mageto; Joseph Mungatu. Copula Analysis of Dependencies Between Extreme Exchange Rates and NSE20 Price Index. Int. J. Data Sci. Anal. 2023, 9(3), 50-59. doi: 10.11648/j.ijdsa.20230903.11

AMA Style

Rosemary Wanjiru Ng’ethe, Thomas Mageto, Joseph Mungatu. Copula Analysis of Dependencies Between Extreme Exchange Rates and NSE20 Price Index. Int J Data Sci Anal. 2023;9(3):50-59. doi: 10.11648/j.ijdsa.20230903.11

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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