Modeling time variation and asymmetry in foreign exchange exposure

Koutmos, Gregory; Martin, Anna D.

doi:10.1016/j.mulfin.2006.03.004

Cited by 34 publications

(30 citation statements)

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“…Chow et al (1997aChow et al ( , 1997b assert that market participants may wrongly assess the exchange rate risk in the long run. Koutmos and Martin (2007) find that the variability in the time-varying exposure is smaller (larger) for the largest (smallest) firms and for industrial (technology) firms. The size effect is also confirmed by Hunter (2005).…”

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confidence: 85%

Exchange Rate Exposure: Do Asymmetries and Volatilities Matter? Evidence from the Taiwan Stock Market

Varga¹

2013

IBR

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This study investigates foreign exchange exposure and the impacts of asymmetries and volatilities on the daily returns of Taiwanese non-financial firms from 1990 to 2010. 88.8% of our samples are negatively exposed, companies benefiting from an appreciation of the domestic currency. 14% of the firms have an asymmetrical profile. If this percentage is not negligible, Taiwanese firms exhibit mainly a symmetric exposure. Currency volatilities have a significant impact for only 7.5% of the firms, but for 37.38% of the sample, we observe the existence of an asymmetric volatility. Among them, 65% exhibit a negative sign meaning that good news have a greater impact on the volatility than bad news, which seems counter-intuitive. These results may be explained by a chasing good news behavior and the effects of a high level of information uncertainty.

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confidence: 85%

Exchange Rate Exposure: Do Asymmetries and Volatilities Matter? Evidence from the Taiwan Stock Market

Varga¹

2013

IBR

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“…rate: (i) the sign of the change in the foreign exchange rate (see, e.g., Bartram, 2004, Bartram and Bodnar, 2012, Chaieb and Mazzotta, 2013, Koutmos and Martin, 2007, (ii) the squared change in the foreign exchange rate (see, e.g., Muller and Verschoor, 2006) and (iii) the 'moneyness' of the option to export, that is, the accumulated recent exchange rate changes as in Boudt et al (2015). The second group of controls consists of dummies for one-off events.…”

Section: Modelling Macro News Effects On the Foreign Exchange Exposurementioning

confidence: 99%

The response of multinationals’ foreign exchange rate exposure to macroeconomic news

Boudt¹,

Neely²,

Sercu³

et al. 2017

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We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms' foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure. *Title Page (including Author names)The response of multinationals' foreign exchange rate exposure to macroeconomic newsThis version: January 13, 2019 AbstractWe use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms' foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.

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“…asymmetric effects. Therefore, an increasing number of studies are shifting their interest to modelling asymmetric exchange rate exposure (Koutmos and Martin, 2007;Hsu et al, 2009;Cuestas and Tang, 2015). In spite of this, the currency exposure at different horizons are rarely investigated, especially in the case of the Chinese currency which has restrictions on the currency daily trading band.…”

Section: Introductionmentioning

confidence: 99%

Does the currency exposure affect stock returns of Chinese automobile firms?

Tang

2018

Empir Econ

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This study examines the symmetric and asymmetric exchange rate exposures of Chinese automobile firms at different time horizons. Empirical findings reveal that firm returns are less likely to be affected by currency movements at short-term (daily) horizons due to restrictions on the currency daily trading band, but (a)symmetric exchange rate exposures appear to be significant at relatively longer horizons after the launch of RMB internationalisation, particularly for monthly horizons. Possible hedging strategies could be the application of Forward Exchange Agreements, price difference between onshore and offshore RMB exchange rate, foreign reserves and other quantitative methods. Since returns of foreign capital shares tend to rise with the application of RMB, firms may also consider listing shares on foreign stock exchange in addition to the domestic market and produce products simultaneously in foreign nations through international expansion.JEL Codes: C58, F3, G15.

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Modeling time variation and asymmetry in foreign exchange exposure

Cited by 34 publications

References 31 publications

Exchange Rate Exposure: Do Asymmetries and Volatilities Matter? Evidence from the Taiwan Stock Market

Exchange Rate Exposure: Do Asymmetries and Volatilities Matter? Evidence from the Taiwan Stock Market

The response of multinationals’ foreign exchange rate exposure to macroeconomic news

Does the currency exposure affect stock returns of Chinese automobile firms?

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