Exchange rate exposure of Latin American firms: Empirical evidence

Santillán‐Salgado, Roberto J.; Núñez-Mora, José Antonio; Aggarwal, Raj; Escobar-Saldivar, Luis Jacob

doi:10.1016/j.mulfin.2019.03.001

Cited by 6 publications

(4 citation statements)

References 25 publications

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“…Table 1. Panel estimation of equation 25Mexican case Brazilian case Mexican and Brazil together Columns 1, 3 and 5 of Table 1 show a negative and significant transmission from the foreign exchange market to the stock market, which is consistent with recent studies for emerging countries, including these two countries (Chkili, 2012;El Abed, 2017;Santillán-Salgado et al, 2019). Second, in columns 2, 4, and 6, of Table 1, the parameters associated with the exchange rate futures return are incorporated.…”

Section: Empirical Researchsupporting

confidence: 84%

“…Regarding Latin American firms, a study for all economic sectors confirms previous findings of an adverse effect of exchange on stock returns, except for Colombia (Santillán-Salgado et al, 2019). For Brazilian companies, Rossi's (2011) study found that the exchange rate exposure changed when Brazil changed from a fixed to a floating regime, wherein foreign currency borrowing and the use of derivatives were essential factors.…”

Section: Foreign Exchange Impact On Stock Marketssupporting

confidence: 65%

See 1 more Smart Citation

Impact of Exchange Rate Derivatives on Stocks in Emerging Markets

Ponce

Castillo-Ramírez

Venegas-Martı́nez

2020

Journal of Business Economics and Management

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This paper investigates the effect of derivatives on the relationship between the foreign exchange rate and the stock market. A theoretical model is used to extend the understanding of that relationship. Also, the model is tested with an empirical analysis using the GMM strategy for the Mexican and Brazilian stock markets for the period 2007 to 2019. Findings reveal that in addition to the spot exchange rate, exchange rate futures explain the currency exposure, wherein the derivative effect is the most prominent. The result implies that both risk sources should be considered in the implementation of risk management or macroeconomic policy. The theoretical results are extended by applying them to international portfolio management, proposing a strategy to mitigate foreign exchange exposure with derivatives. This study contributes to the literature by explaining why the minimum variance hedge ratio plays an essential role in the foreign exchange rate and stock market nexus.

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Section: Empirical Researchsupporting

confidence: 84%

Section: Foreign Exchange Impact On Stock Marketssupporting

confidence: 65%

Impact of Exchange Rate Derivatives on Stocks in Emerging Markets

Ponce

Castillo-Ramírez

Venegas-Martı́nez

2020

Journal of Business Economics and Management

View full text Add to dashboard Cite

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“…The second line of research, in turn, focuses on the quantification of the business exposure to risk. Especially in the first two decades of the 21st century, an important body of literature was developed focusing on the analysis of the exchange rate risk [27] (United States); [28] (France) [29] (United Kingdom); [30] (United Kingdom); [31] (Europe); [32] (Nigeria); [33] (Latin America); [34] (India); [35] (United Kingdom)). While these studies are focused on different markets and geographical areas, all reach similar conclusions.…”

Section: Risk Exposurementioning

confidence: 99%

Commodity Exposure in the Eurozone: How EU Energy Security is Conditioned by the Euro

Lado-Sestayo

Llano-Paz²,

Búa

et al. 2022

SSRN Journal

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“…The multinomial logistic regression model is an extended model of the binomial logistic regression as it allows more than two nominal categorization of the dependent variable. Many researchers (Santillán-Salgado et al, 2019; Sikarwar & Gupta, 2019) have successfully used dummy coding of independent variables in their use of the model. This model has been extensively used by risk analyst when they analyze the relationships between non-metric dependent variable and metric and non-metric categories of independent variables.…”

Section: The Modelmentioning

confidence: 99%

Factors Determining the Exchange Rate Exposure of Firms: Evidence from India

Sayed

Jayapal

2021

Business Perspectives and Research

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Exchange rate exposure is a strategic decision in finance and risk management at both the micro and macro level of business operations. Literature on the measurement, and management of this risk, has had no consensus on the factors affecting it as these factors seem to be dynamic. In an effort to consider a comprehensive study at the firm level, this article examines the exchange rate exposure of 271 constituent firms from the BSE S&P 500 index. The study period was 2001 to 2020 divided into sub-periods around the financial crises of 2008. The study uses two contemporary approaches (the capital market approach and the cash flow approach) and five relevant exchange rates (USD, EURO, GBP, JPY, and REER) to measure the foreign exchange. The sample firms were divided into 10 industrial sectors to identify the factors that lead to exposure of firms to exchange rate volatility. We use multinomial logistic regression to regress the select factors with the measured value of exchange rate exposure. The findings of the article suggest that multinationality, fixed asset utilization ratio, hedging activities, industrial sectors, size, and age of the firms are the significant determinants of such exposure. The results varied during the sub-periods and across industries.

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Exchange rate exposure of Latin American firms: Empirical evidence

Cited by 6 publications

References 25 publications

Impact of Exchange Rate Derivatives on Stocks in Emerging Markets

Impact of Exchange Rate Derivatives on Stocks in Emerging Markets

Commodity Exposure in the Eurozone: How EU Energy Security is Conditioned by the Euro

Factors Determining the Exchange Rate Exposure of Firms: Evidence from India

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