Journal article
Exchange Rate Exposure : International Evidence from Daily Firm-Level Data
Journal of economic integration, v 32(1), pp 112-159
01 Mar 2017
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This paper examines impact of changes in the foreign exchange rate on firms' stock returns in global markets. Using daily firm-level data for 14 international markets from January 2000 to December 2011, we find evidence that changes in the trade-weighted multilateral exchange rate systematically impact individual firms' stock returns for all seven emerging markets and some advanced economies. Controlling for price factors such as market risk premium, Fama-French factors, the momentum, and the liquidity factor, we correct the upward bias of the estimation. Stocks in export-oriented economies are shown to considerably benefit from local currency depreciation. Further, in emerging markets, exchange rate movements affect larger firms with more intense global connections, but in advanced markets, they affect smaller firms with limited access to hedging to a larger extent. Long-run equilibrium relationships between stock markets and foreign exchange markets become stronger since the global financial crisis of 2008 similar to 2009.
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Details
- Title
- Exchange Rate Exposure : International Evidence from Daily Firm-Level Data
- Creators
- Bang Nam Jeon - Drexel UniversityDazhi Zheng - Drexel UniversityLei Zhu - Drexel University
- Publication Details
- Journal of economic integration, v 32(1), pp 112-159
- Publisher
- Sejong Univ, Center Int Economics
- Number of pages
- 48
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000395862100005
- Scopus ID
- 2-s2.0-85014796766
- Other Identifier
- 991019330811404721
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- Web of Science research areas
- Economics