Proceedings of 11th Asian Business Research Conference 26-27 December, 2014, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-68-9 Dependence between Stock Market and Foreign Exchange Market in South Asia: A Copula-Garch Approach Mr. Javed Bin Kamal The paper studies the dependence pattern between stock market and foreign exchange market of three countries of South Asia; namely Bangladesh, India and Sri Lanka using five copula functions, to reveal asymmetric dependence structure. Using daily return series for the period of July 31, 2009 to July 31, 2013, the paper applied ARMA-GARCH type model to obtain marginal distribution. The results from marginal models indicate that volatility dies immediately after a crisis; meanwhile positive news creates more volatility than negatives. The results from copula models indicate existence of asymmetric dependence, with upper tail dependence for all pairs, comparing negligible lower tail dependence for Srilankan pair. Both Bangladeshi and Indian pairs provide some diversification possibility, against no diversification for investing in Srilankan market. Copula based dependence between stock market and exchange rate market provide important implication in international investment decision making. JEL Classification: C32, C51, C52, G15, F30. Keywords: Copulas, Tail dependence, Dependence structure, GARCH, Stock return, Foreign exchange rate return. ___________________________________________ Mr. Javed Bin Kamal, Department of Economics, East West University, Dhaka, Bangladesh.