A Re-Examination of Exchange Rate Exposure / Kathryn M.E. Dominguez, Linda L. Tesar.

Format:

Book

Author/Creator:

Dominguez, Kathryn M.E.

Contributor:

National Bureau of Economic Research.

Tesar, Linda L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8128.

NBER working paper series no. w8128

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

Finance theory suggests that changes in exchange rates should have little influence on asset prices in a world that has become increasingly with integrated capital markets. Indeed, the existing literature examining the relationship between international stock prices and exchange rates finds little evidence of systematic exchange rate exposure. We argue in this paper that the absence of evidence may be due to restrictions imposed on the sample of data and the empirical specifications used in previous studies. We study a broad sample of firms in eight countries over an eighteen-year period. We find that firm-level and industry-level share values are significantly influenced by exchange rates. Further, we do not find evidence that exchange rate exposure is falling (or becoming less statistically significant) over time. Our results suggest that significant firm, industry and country-specific differences remain even as financial markets become more and more 'integrated'.

Notes:

Print version record

February 2001.