This study looked at how exchange rates and stock markets in different countries interacted from 1974 to 1994. They used cointegration and error correction models to analyze the long-term relationship and short-term dynamics. The researchers found that stock prices and exchange rates don't move together in the long run, but they do have similar patterns over time. Generally, exchange rates and stock prices tend to move in opposite directions. They also discovered that the risk of the foreign exchange market is connected to the difference between domestic and foreign stock market risks. Additionally, changes in exchange rates are more related to risk factors than to potential returns.