In this study, short and long-run effects of exchange rate on stock prices are analyzed for the Fragile Five countries where foreign investors have a substantial share. Long term effects are estimated by Engle Granger and Johansen cointegration methods; and short term effects are estimated by Ordinary Least Squares (OLS) and Smooth Transition Regression (STR) models. Parameters are also estimated by Nonlinear Smooth Transition Regression Error Correction Model (LSTRECM) that accounts for short and long-run effects within a same equation. It is observed that long-run interaction of two nonstationary variables may diverge among regimes in the short-run. The results for Turkey can be summarized as follows: A simultaneous increase in the exchange rate increases the stock prices according to Engle Granger and Johansen methods and indicates a cointegration relationship among the two variables. In the short-run, according to the first regime of LSTRECM, OLS and STR specification results, the simultaneous effect of exchange rate on the stock prices is negative but turns to a positive in the second regime of LSTRECM.