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The Exchange Rate Exposure of US Multinationals
... Following Adler and Dumas (1984) assumption of linear relationship between FX rates and firm market value, almost all empirical researches do the same for the study of this relationship; starting from Jorion (1990) linear model use to Huffman et al. (2010) comparison between two models, linear and non-linear. In fact, Jorion (1990) is the first study to, empirically, test this relationship. ...
... Following Adler and Dumas (1984) assumption of linear relationship between FX rates and firm market value, almost all empirical researches do the same for the study of this relationship; starting from Jorion (1990) linear model use to Huffman et al. (2010) comparison between two models, linear and non-linear. In fact, Jorion (1990) is the first study to, empirically, test this relationship. The major contribution of this study is that it adds stock market returns as an explanatory variable of firm market value, in addition to FX rate, as firm share price, also, depends from trends of the stock market. ...
... Most of empirical studies results (e.g. Jorion (1990); He and Ng (1998); Hsin et al. (2007)) show no significant FX risk exposure. However, some of them (e.g. ...
This paper studies the relationship between firm market and book values exposures to foreign exchange risk and the dual role of hedging policy. Given the scarcity of theoretical researches on the subject, we propose a new theoretical framework that studies the relationship between firm hedging policy and foreign exchange risk effects. We argue that firm market value sensitivity to foreign exchange rate variations have relationship with hedging using currency derivatives and other tools such as foreign debt. We suggest, further, that this relationship has an impact on firm's equity value variations known as residual exposure to foreign exchange risk. Our theoretical discussions and estimation models, clearly, show that firm foreign exchange risk hedging is an elementary factor, as we demonstrate that it is quite related to both firm market and book values sensitivities to foreign exchange risk.
... Beginning with the works of Shapiro (1975), Dumas (1978), Adler & Dumas (1980, 1984), and Hodder (1982, there is a lengthy list of studies that explore the foreign exchange rate exposure of firms in developed countries. After these studies, Jorion (1990Jorion ( , 1991 examines the impact of FXR fluctuations on firm valuation of 287 US multinational corporations. He presents a two-factor model to measure foreign exchange exposure. ...
... They used equity returns of firms as the proxy of firm value that's why they just analyze elasticity of firm value to variations in FXR. This model is in line with the model proposed by Jorion (1990) and departed from Adler and Dumas (1984) due to inclusion of market factor, which is considered to be a significant part in generating stock returns. They found the presence of time varying currency exposure across countries for multinational corporations. ...
... Ampomah, Mazouz, and Yin (2013) measure FXR risk by analyzing the individuals and combined impacts of time varying adjustments of risk and market return orthogonalization on the FXRE of firms. In Jorion's (1990) approach to measure exposure the coefficient of FXRE does not estimate the stock's exposure to the FXR but measures the exposure of market portfolio. To cope with this issue, they estimated the orthogonalized market return by taking market return which is uncorrelated with FXR variations as independent variable. ...
Purpose: This study examines the asymmetric and nonlinear effects of exchange rate
changes on stock prices of Pakistani nonfinancial firms from 2000 to 2020.
Research Gap: There is a limited empirical evidence in the literature regarding the
non-linear effects on FXR movements on share prices. Furthermore, limited research
has examined the asymmetric effects of FXR positive and negative changes,
particularly in developing economies like Pakistan. This study fills this gap by
quantifying asymmetric FXREs within Capital Asset Pricing Model (CAPM)
framework for individual firms.
Design/Methodology/Approach: This study includes all non-financial firms listed
on the Pakistan Stock Exchange (PSX).We applied a rolling window estimation
method within the CAPM framework. To address collinearity between FXR returns
and equity market returns, we orthogonolized FXR returns and then orthogonalized
equity market returns to the same macroeconomic factors. Finally, we estimate the
sensitivity of individual firm stock returns to the orthogonalized FXR changes and
the orthogonalized equity returns.
The Main Findings: The outcomes affirm that FXR appreciations positively
influence stock returns. Additionally, a majority of firms exhibit positive asymmetric
and nonlinear exposure.
Theoretical/Practical Implications of the Findings: Our study’s results have
practical implications for government authorities, investors, and firm managers. It
suggests considering FXR fluctuations when making financial decisions, designing
dynamic economic policies, and formulating investment strategies.
Originality/Value: Unlike prior studies mainly focusing on symmetric FXREs, this
study contributes by exploring the asymmetric FXREs of both FXR appreciations and
depreciations. Moreover, it sheds light on the non-linearity in FXREs relatively
unexplored in the existing literature.
... The seminal work done by Adler and Dumas (1980) and Hodder (1982) can be interpreted by defining exchange rate to currency risk using the regression coefficient concept of exposure. Later, the addition of value-weighted market index as proposed by Jorion (1990) was used to control for the market movements. Jorion (1990), showed that only 5 percent of the firms having substantial exchange rate exposure. ...
... Later, the addition of value-weighted market index as proposed by Jorion (1990) was used to control for the market movements. Jorion (1990), showed that only 5 percent of the firms having substantial exchange rate exposure. Familiar research done (Bodnar & Gebhardt, 1999);Amihud, 1994;Bartov, Gordon & KauV, 1994) indicated that US firms are not significantly exposed to foreign exchange rate exposure. ...
... The evidence against the foreign exchange determinants is conclusive. Research done by Jorion (1990) emphasized that exposure is positively correlated with the total sales made overseas and thus concluded that degree of foreign involvement increases the foreign exchange exposure. This is consistent by the works of (Jay & Prasad, 1995;Allayanis & Ofek, 2001;He. ...
Exchange rate fluctuation is the major concern for the firms globally, therefore it is essential for firms to
know how much they are exposed to these fluctuations. The study aims to measure the foreign exchange
exposure and its determinants for selected non-financial Indian firms. The period of analysis is concentrated
from 2000-2015. This study has used a panel data methodology with fixed effects model to measure the firm’s
exposure by establishing the relationship with the exchange rate changes and the stock returns for the sample
of 85 non-financial Indian firms. Furthermore, the firm-sensitive determinants like, export earning, import
payments, net capital flows and size of the firm were used to estimate their effect on the foreign exchange
exposure. The findings of the study showed that 55% variation in the stock returns was explained by the
variation in the exchange rates. With respect to the determinants, it is found that market capitalization, which
is a proxy for the size of the firm, is relatively most significant determinant for the exchange rate exposure.
This is followed by net capital flows and trade.
... Uluslararası literatürde döviz kurlarının hisse senedi fiyatlarını etkilediğini yani geleneksel yaklaşımı destekleyici sonuçlara ulaşan çalışmaların (Abdalla ve Murinde, 1997;Chiang vd., 2000;Phylaktis ve Ravazzolo, 2005;Yau ve Nieh, 2006;Yau ve Nieh, 2009;Lean vd., 2011;Liu ve Wan, 2012;Olugbenga, 2012;Lawal ve Ijirshar, 2013;Sichoongwe, 2016) yanında, hisse senedi fiyatlarının döviz kurunu etkilediğini yani portföy dengesi yaklaşımının geçerli (Soenen ve Hennigar, 1988;Gavin, 1989;Ajayi vd., 1998;Garnger vd., 2000;Tai, 2007;Pan vd., 2007;Koulakiotis vd., Tsai, 2012;Liang vd., 2013;Salisu ve Ndako, 2018;Xie vd., 2020;Malik, 2021;Nusair ve Olson, 2022) olduğunu tespit eden çalışmalara ek olarak hem geleneksel yaklaşımın hem de portföy yaklaşımının (Bahmani-Oskooee ve Sohrabian, 1992; Mok, 1993;Phylaktis ve Ravazzolo, 2005;Zhao, 2010;Lin, 2012;Andreou vd., 2013;Lim ve Sek, 2014;Aslam, 2014;Khan ve Ali, 2015;Tule vd., 2018) geçerli olduğunu tespit eden çalışmalar söz konusudur. Ayrıca döviz kuru ile hisse senedi fiyatları arasında herhangi bir ilişkinin olmadığını (Jorion, 1990;Bartov ve Bodnar 1994;Mishra, 2004;Gulati ve Kakhani, 2012;Zubair, 2013;Suriani vd., 2015) öne süren çalışmalar da kendine yer edinmiştir. ...
... Son olarak Model 4'e bakıldığında döviz kuru ile BİST Sınai Endeksi arasında bir ilişki olmadığı sonucuna ulaşılmıştır. Benzer sonuçlara Jorion, 1990;Bartov ve Bodnar 1994;Mishra, 2004;Gulati ve Kakhani, 2012;Zubair, 2013 ve Suriani vd., 2015 çalışmalarında farklı piyasalar için raporlandığı görülmektedir. ...
... Finally, when Model 4 is examined, it is concluded that there is no relationship between the exchange rate and the BIST Industrial index. Similar results were found in Jorion, 1990;Bartov and Bodnar 1994;Mishra, 2004;Gulati and Kakhani, 2012; In the studies of Zubair, 2013 andSuriani et al., 2015, it seen that it is reported for different markets. ...
Hisse senedi piyasası ile döviz kurları arasındaki ilişki özellikle gelişmekte olan ülkeler için araştırılmaktadır. Çünkü bu ülkeler ekonomik büyümeleri için dış tasarruflara ihtiyaç duymaktadırlar. Ayrıca yabancı fonlar da bu piyasalarda var olan fırsatları değerlendirmek üzere farklı sektörlere yatırım yapmayı tercih etmektedirler. Bu sektörlerden biri de hisse senedi piyasasıdır. Hisse senedi piyasasına gelen fonların nedeni ise literatürde farklı teoriler yardımı ile açıklanmaktadır. Bu teoriler, özellikle gelişmekte olan ülke piyasaları üzerine geçerliliği incelenmektedir. Bu kapsamda çalışmada Türkiye’de hisse senedi piyasaları arasında yer alan BİST100, BİST Mali, BİST Hizmet, BİST Sınai ve BİST Teknoloji endeksleri ile döviz kuru arasındaki ilişki araştırılmaktadır. Bu amaçla çalışmada beş farklı model kullanılmış ve bu modelleri tahmin etmek üzere ARDL yöntemi tercih edilmiştir. ARDL yönteminden elde edilen bulgulara göre BİST100, BİST Mali ve BİST Hizmet endekslerinde geleneksel teorilerin geçerli olduğu belirlenmiştir. BİST Teknoloji endeksinde ise portföy teorisinin varlığı tespit edilmiştir. Son olarak BİST Sınai endeksinde ise döviz kuru ile hisse senedi arasında bir ilişki olmadığı sonucuna ulaşılmıştır.
... Sebenarnya, pengukuran risiko valuta asing merupakan hal yang relatif baru di dalam bidang keuangan internasional 14 . Mengingat kompleksnya dimensi risiko valuta asing, literatur keuangan telah mengemukakan beberapa rumusan ukuran-ukuran risiko valuta asing [Shapiro (1974), Hodder (1982, Adler dan Dumas (1984), Flood dan Lessard (1986), Jorion (1990Jorion ( , 1991, Allayannis dan Ofek (1997)]. ...
... Beberapa penelitian empiris [Solnik (1987), Ma dan Kao (1990), Jorion (1990), Fang dan Loo (1996, Manurung (1996), He dan Ng (1998), Hermanto (1998), Sakhowi (1999 Bagian berikut ini akan menguraikan secara lebih rinci beberapa hipotesis motif hedging (yang dilakukan oleh perusahaan) yang oleh Tufano (1996) dikategorikan ke dalam paradigma maksimisasi kekayaan pemegang saham. ...
... (1) ukuran market exposure yang dihitung berdasarkan metode yang diterapkan oleh Jorion (1990) dan He dan Ng (1998) 42 , dan (2) ukuran balance sheet exposure yang merupakan rasio antara total kewajiban dalam valuta asing terhadap total aset perusahaan. ...
Dengan menggunakan kerangka teori manajemen risiko yang telah berkembang di dalam literatur keuangan, penelitian ini antara lain: (1) menguji secara empiris perilaku hedging perusahaan-perusahaan Indonesia dengan instrumen derivatif valuta asing, (2) mengembangkan dan menguji suatu pemikiran baru tentang pengaruh restrukturisasi hutang terhadap perilaku hedging perusahaan-perusahaan tersebut, serta (3) menguji pengaruh kebijakan hedging perusahaan terhadap kekayaan pemegang saham.
Sampel penelitian terdiri dari perusahaan-perusahaan non-finansial yang terdaftar di Bursa Efek Jakarta selama periode 1996-2001; di mana penelitian ini menggunakan metode estimasi Logit untuk meneliti keputusan hedging (hedging decision) perusahaan, metode estimasi Tobit untuk meneliti intensitas/aktifitas hedging (extent of hedging) perusahaan, dan metode estimasi OLS untuk menguji pengaruh hedging terhadap kekayaan pemegang saham.
Berdasarkan pendekatan pooling dengan dummy tahun, seperti juga hasil temuan kebanyakan penelitian terdahulu, hasil penelitian kali ini pun menunjukkan bahwa perilaku hedging perusahaan lebih dimotivasi oleh keinginan untuk meningkatkan kekayaan pemegang saham daripada maksimisasi utilitas manajer. Secara lebih spesifik, penelitian empiris menemukan bahwa perusahaan melakukan hedging dengan instrumen derivatif valuta asing untuk: (1) mengurangi risiko kepailitan dan biaya-biaya financial distress, (2) menghindari kerugian akibat underinvestment, (3) mengatasi permasalahan asset substitution, dan (4) meningkatkan kapasitas hutang. Namun demikian, masih dalam konteks maksimisasi kekayaan pemegang saham, penelitian ini tidak menemukan bukti bahwa perilaku hedging perusahaan dimotivasi oleh keinginan untuk menghemat pajak penghasilan.
Penelitian ini pun menemukan bahwa perusahaan-perusahaan yang sedang melakukan restrukturisasi hutang cenderung untuk tidak melakukan hedging, atau setidaknya mengurangi jumlah nosional instrumen derivatif valuta asing yang dimiliki. Temuan ini konsisten dengan pemikiran option value of levered equity yang pertama kali dikembangkan oleh Black dan Scholes (1973), di mana penelitian ini menunjukkan bahwa peningkatan volalitas dari nilai tukar mata uang akan meningkatkan nilai ekuitas pemegang saham, sehingga tidak dilakukannya hedging oleh perusahaan yang hutang-hutangnya sedang direstrukturisasi akibat financial distress merupakan perilaku yang rasional.
Terdapat pula beberapa temuan lain. Perusahaan-perusahaan milik negara dan perusahaan-perusahaan yang bergerak di sektor properti cenderung untuk tidak melakukan hedging; hal ini karena masing-masing kelompok perusahaan tersebut dipandang memiliki biaya-biaya financial distress dan kepailitan yang lebih rendah, di mana perusahaan-perusahaan milik negara praktis dijamin oleh pemerintah, sementara perusahaan properti memiliki asset tangibility and collateralizability yang relatif tinggi. Dilakukannya hedging oleh perusahaan-perusahaan multinasional yang terdiversifikasi secara geografis menunjukkan bahwa operational hedging saja dipandang kurang memadai untuk meredam risiko perubahan nilai tukar, sehingga tetap diperlukan financial hedging.
Akhirnya, penelitian ini menemukan bukti bahwa kebijakan hedging perusahaan merupakan value creating activity untuk pemegang saham. Kendati nilai pemegang saham bereaksi positif terhadap keputusan dilakukannya hedging, namun pengaruh yang lebih signifikan diperoleh dari intensitas hedging atau nilai nosional instrumen derivatif yang dimiliki perusahaan.
... The dollar index for multinational companies represents volatile uncertainty. Based on Jorion's study, the relationship between the value of US multinational firms and the exchange rate has significant cross-sectional differences [5]. The sensitivity of the firm's value was positively related to the degree of foreign involvement. ...
... From the fixed order result of the two images in Figure 4, there are 7 lag values beyond the x-axis: 1, 2, 5, 9, 10, 15 and 16. Hence, AR(p) has the order of (1,2,5,9,10,15,16), while MA(q) also follows the same sequence, i.e. the values of p and q are both (1,2,5,9,10,15,16). To have better accuracy on forecasting volatility of future log return of Pfizer Inc.'s stock price, this paper uses ARCH model for testing the characteristics of the firm's log-return volatility. ...
... From the fixed order result of the two images in Figure 4, there are 7 lag values beyond the x-axis: 1, 2, 5, 9, 10, 15 and 16. Hence, AR(p) has the order of (1,2,5,9,10,15,16), while MA(q) also follows the same sequence, i.e. the values of p and q are both (1,2,5,9,10,15,16). To have better accuracy on forecasting volatility of future log return of Pfizer Inc.'s stock price, this paper uses ARCH model for testing the characteristics of the firm's log-return volatility. ...
The stock and exchange rate markets play central roles in domestic and international trade. Since volatility of either one of them can bring significant impact to any business. It is essential to find how changes in exchange rate influence the stock market so that policymakers can build appropriate regulations to boost the national stock market, and investors may invest by taking the minimum risk. This paper selects the stock of a well-known multinational firm, Pfizer, and the US dollar index from October 27, 2005, to September 5, 2019. It applies the ADF test to validate the stationarity of the sample data, the VAR model with IRF to investigate whether the increasing exchange rate brings a positive effect on Pfizer's stock return or not, and the ARMA-GARCHX model to study whether the volatility of exchange rate is significant to changes of Pfizer's stock return in the long run. The study's findings indicate that the exchange rate volatility does not have a long-term relationship with Pfizer's stock price.
... The investigation of the study proceeds with the use of the ARIMA model to demonstrate estimation of the autocorrelations of the squared residuals at a condition that they are significant when the p values will be zero, implying Autoregressive Conditional Heteroscedasticity (ARCH) or vice-versa. Hence, the use of the two-factor and the multiple-factor Jorion (1990) models in the examination will help to find the relationship between firm performance and the GOV15 and GOV17 indexes, the exchange rate exposure index (EXREX), the trading index (NETTRADE), and derivative usage (STOCKRETURNS) index. ...
... Secondly, the examination seeks to find out the impact of the exchange rates on firms and further pursue the investigation to show that improvement in the provisions in corporate governance may reduce exchange rate risk and improve trade. The following two-factor model of Jorion's (1990) is used. ...
... Because exchange rates and stock prices are frequently affected by the same shocks, Jorion's (1990) twofactor model is enhanced by including a stock market return in Equation (5). ...
This study seeks to use the legally required governance reforms of the Sarbanes‐Oxley Act of 2002, the Financial Reporting Council 2012–2018 and the EU COM 2012–2014 to investigate the relationship between corporate governance performance, exchange rate exposure and hedging by using two governance indexes based on a more comprehensive model previously constructed. The paper is one of the first to adopt the measures that state the importance of internal (corporate culture) and external (corporate legality) governance qualities that help prevent exchange rate exposure and improve trade and hedging. The examination is conducted by using the ARCH and ARMA models as well as a two‐factor and a multiple‐factor model to capture the variations that significantly account for variations in the exchange rate exposure, net trade, and stock market returns. Empirical results revealed that an improvement in corporate governance indexes is associated with a greater reduction in exchange rate exposure, an increase in net trade, and more hedging at the firm level. In addition, adoption of the corporate legality measures has a greater impact on exchange rate exposure and hedging than corporate culture measures.
... A large number of researchers have investigated the level of exchange rate exposure and its impact on firm value with mixed evidence. Several earlier studies offer evidence that questions whether exchange risk exists (e.g., Bodnar & Gentry, 1993;Jorion, 1990Jorion, , 1991. For example, employing stock returns to measure exchange risk, Jorion (1990Jorion ( , 1991 show that exchange risk is not necessarily factored in firm value. ...
... Several earlier studies offer evidence that questions whether exchange risk exists (e.g., Bodnar & Gentry, 1993;Jorion, 1990Jorion, , 1991. For example, employing stock returns to measure exchange risk, Jorion (1990Jorion ( , 1991 show that exchange risk is not necessarily factored in firm value. Subsequent studies, however, report significant levels of exposure (e.g., Bae & Kwon, 2021;Dominguez & Tesar, 2006;He & Ng, 1998) and the existence of an exchange risk premium in pricing (e.g., Dumas & Solnik, 1995;Kwon et al., 2005). ...
... As the first step to examine the three research issues in our study, we start with the measurement of the degrees of exchange rate exposures from regression Eq. (1) (Bae & Kwon, 2021;Jorion, 1990;Wei & Starks, 2013): ...
This paper focuses on managing exchange rate risk associated with a secondary, non-USD exchange rate of Japanese yen (JPY). Employing Korean firm data, our preliminary analysis reveals that Korean firms are exposed differently to changes in the KRW/JPY rate than to changes in the KRW/USD rate. Our results show that firms exhibiting significant shifts in exposure from pre- to post-global financial crisis have distinctively different firm attributes including more currency derivatives use and lower firm values, compared to firms exhibiting little such shifts. A further analysis reveals that the lower values of high exposure firms are attributable mainly to the financial risk from foreign currency borrowing, but not to the operating risk resulting from exporting activities. Hence, the currency derivative use by Korean firms hardly helps them mitigate the value loss from heightened capital costs of foreign borrowing following the crisis.
... In fact, the subject of foreign exchange exposure has been the focal of empirical research for some time now both in developed and emerging nations. Though more extensively explored in developed economies especially the US, UK, Japan, etc. among others (Alder and dumas 1984;Jorion 1990;Amihud 1994;Bortov and Bodnar 1994;Choi and Prasad 1995;He and Ng 1998;Halil Kiymaz 2003;Raj Aggarwal and Joel T. Harper 2010). Despite strong theoretical underpinnings, the above-mentioned studies have provided inconsistent and varied results. ...
... This section provides a brief of studies covering almost all the aspects of the study. Jorion (1990) was the first to empirically test the relationship between exchange rate and stock returns. The study found that firms exhibiting significant foreign exchange exposure were only 5% of the sample. ...
... Most of the earlier studies (jorion, 1990;Amihud, 1994) had used the capital market model for the measurement of exchange rate exposure. However, lately, researchers have attempted to measure exchange rate exchange using a cash flow model. ...
This paper investigates the Foreign exchange exposure of Indian firms using the monthly data for the period of 10 years from 2012 to 2021. The sample period has been divided into two halves from study finds that 35 (50%) of the sample firms significantly resulted in exchange rate exposure. Out of which 15 firms have exhibited positive exposure which indicates they have got benefitted from the depreciation of the rupee whereas the rest of the 20 firms have resulted in negative exposure. Further, 17 (49%) of firms have got exposed to Foreign exchange exposure using actual exchange rate changes however when tested using unanticipated exchange rate changes 18 (51%) more firms showed significant results. This indicates that unanticipated exchange rate changes have a robust power in explaining the stock returns of a firm. This paper has practical implications for policymakers who have to manage the Exchange rate mechanism of the country.
... Þá hefur verið litið til breytileika í markaðsvirði fyrirtaekis miðað við breytingar á virði uppgjörsmyntar 3 yfir sama tímabil, nánar tiltekið tengsl milli markaðsávöxtunar alþjóðlegra fyrirtaekja og hreyfinga á gjaldmiðlum. 4 Almennt eru niðurstöður þessara rannsókna blendnar enda erfitt að greina á milli áhrifa gengishreyfinga á markaðsávöxtun fyrirtaekja og annarra áhrifa á markaðsvirði (Bodnar og Gentry, 1993;Dominguez og Tesar, 2006;Jorion, 1990). Almennt reynast áhrif gengishreyfinga meiri á lítil og meðalstór fyrirtaeki en stór þar sem staerri fyrirtaeki eru virkari í að stýra gengisáhaettu. ...
... Uppgjörsmynt oftast gagnvart viðskiptavegnum erlendum myntum. 4 Eldri rannsóknir um áhrif gengisbreytinga á virði fyrirtaekja eru meðal annarsShapiro (1977),Hodder (1982) ogJorion (1990). ...
Í greininni eru birtar niðurstöður rannsóknar á gengisáhættu, stýringu hennar og stjórnarháttum hjá íslenskum rekstrarfyrirtækjum. Rannsóknin var framkvæmd með spurningakönnun sem send var á 181 af stærstu rekstrarfyrirtækjum landsins. Svör bárust frá 69 fyrirtækjum, eða 38%, og af þeim segjast 57, eða 82,5%, standa frammi fyrir einhverri gengisáhættu. Helstu niðurstöður rannsóknarinnar eru þær að 10% veiking uppgjörsmyntar hefði að meðaltali 4,9% áhrif á virði fyrirtækisins hjá þeim sem telja að hún hafi veruleg áhrif. Áhættustýring fyrirtækisins minnkar þau áhrif að meðaltali í 2,7%, eða um tæpan helming, að mati svarenda. Gengisáhætta fyrirtækjanna er mest í tekjum, gjöldum og sjóðstreymi en hjá þeim sem gera upp í íslenskum krónum er gengisáhætta í skuldum einnig algeng. Um tvö af hverjum þremur fyrirtækjanna marka sér stefnu um stýringu á gengisáhættu og í um þriðjungi tilfella er stefnan samþykkt formlega af stjórn. Innan við helmingur er hins vegar með mótaðan áhættuvilja. Framkvæmd áhættustýringar er allnokkuð miðstýrð og miðstýring eykst með stærð fyrirtækja. Fjármálastjórar bera yfirleitt ábyrgð á stýringunni en hjá minni fyrirtækjum er hún oft hjá forstjóra. Fáein stór fyrirtæki eru með sérstakt starf áhættustjóra. Meginmarkmið stýringarinnar er oftast að draga úr breytileika í sjóðstreymi eða hagnaði ellegar að tryggja að sjóðstreymi haldist yfir ákveðnu lágmarki. Til að ná því markmiði eru rekstrarvarnir mun meira notaðar en fjárhagslegar varnir en um 95% fyrirtækja segjast nota rekstrarvarnir að einhverju leyti samanborið við 76% sem segjast nota fjárhagslegar varnir. Mest notuðu rekstrarvarnirnar eru innkaup í erlendum gjaldmiðlum en af fjárhagslegum vörnum eru bæði afleiður og lántökur í erlendum gjaldmiðlum notaðar af um helmingi fyrirtækjanna.
... Crossborder payments bring with them this risk, as transactions usually involve two or more currencies and different exchange rates. Due to its negative effect on profit margins, increases in transaction costs, and uncertainty of the business's finances, unmanaged FX risk can not only erode profit margins but also increase transaction costs and ultimately erode profit margins (Jorion, 1990). Therefore, these firms must manage foreign exchange risk as doing so ensures their fortunes do not suffer at the hands of unfriendly foreign exchange rates while they go about their business (Marshall, 2000). ...
... Futures contracts and forward contracts were the next best options, reducing FX risk by an average of 29.1% and 28.6%, respectively, while options contracts proved to be the most efficient, reducing FX risk on average by 31.8%. These results support Brown (2001) who found that options provide firms with greater flexibility by allowing them to limit potential losses while enjoying favorable exchange rate movements (Jorion, 1990). Firms can lock in exchange rates allowing them to not have to execute, providing some protection from adverse movements in the currency markets (Bartram, Brown & Fehle, 2009). ...
The volatility of global currency markets presents a major challenge to firms engaged in cross-border payments with foreign exchange (FX) risk. This study examines different FX risk management strategies, and specifically the effectiveness of hedging instruments, i.e., options, futures, and forward contracts, in reducing currency exposure. A study of major currency pairs from 2015 to 2019 shows that EUR/GBP and USD/GBP pairs are highly volatile, mainly influenced by geopolitical factors such as Brexit. Results are quantified and show that options contracts are the best at mitigating FX risk, reducing exposure by an average of 31.8%, followed closely by futures and forward contracts. Smaller risk reduction is provided by natural hedging, an imperfect solution but indicating the need for a diversification approach. The firms that did not use any hedging strategies had higher exposure to FX risk. Interviews of firms reveal that hedging is effective, but that cost and operational complexity may inhibit some firms from using these strategies. In general, the study emphasizes the need to adopt a comprehensive FX risk management framework that incorporates financial instruments and natural hedging to stabilize the financial condition in cross-border transactions.
... This flexibility is not without its costs, as there is a paid premium associated with options not present in forwards/futures. Option derivatives are useful during the volatile environment to safeguard against unfavorable fluctuations coupled with the ability to engage the uplifting movement of exchange rates (Jorion, 1990). ...
... Using a stock price response to the changes in the exchange rate, Jorion, P. (1990) looked at the exchange risk that was facing the U.S firms. The study employed regression models and realized that high foreign exchange exposure firms had higher stock returns volatility. ...
... Crossborder payments bring with them this risk, as transactions usually involve two or more currencies and different exchange rates. Due to its negative effect on profit margins, increases in transaction costs, and uncertainty of the business's finances, unmanaged FX risk can not only erode profit margins but also increase transaction costs and ultimately erode profit margins (Jorion, 1990). Therefore, these firms must manage foreign exchange risk as doing so ensures their fortunes do not suffer at the hands of unfriendly foreign exchange rates while they go about their business (Marshall, 2000). ...
... Futures contracts and forward contracts were the next best options, reducing FX risk by an average of 29.1% and 28.6%, respectively, while options contracts proved to be the most efficient, reducing FX risk on average by 31.8%. These results support Brown (2001) who found that options provide firms with greater flexibility by allowing them to limit potential losses while enjoying favorable exchange rate movements (Jorion, 1990). Firms can lock in exchange rates allowing them to not have to execute, providing some protection from adverse movements in the currency markets (Bartram, Brown & Fehle, 2009). ...
The volatility of global currency markets presents a major challenge to firms engaged in cross-border payments with foreign exchange (FX) risk. This study examines different FX risk management strategies, and specifically the effectiveness of hedging instruments, i.e., options, futures, and forward contracts, in reducing currency exposure. A study of major currency pairs from 2015 to 2019 shows that EUR/GBP and USD/GBP pairs are highly volatile, mainly influenced by geopolitical factors such as Brexit. Results are quantified and show that options contracts are the best at mitigating FX risk, reducing exposure by an average of 31.8%, followed closely by futures and forward contracts. Smaller risk reduction is provided by natural hedging, an imperfect solution but indicating the need for a diversification approach. The firms that did not use any hedging strategies had higher exposure to FX risk. Interviews of firms reveal that hedging is effective, but that cost and operational complexity may inhibit some firms from using these strategies. In general, the study emphasizes the need to adopt a comprehensive FX risk management framework that incorporates financial instruments and natural hedging to stabilize the financial condition in cross-border transactions.
... A substantial inverse relationship between dollar value and stock prices was discovered by Soenen and Henniger using monthly data for stock prices and effective exchange rates from 1980 to 1986 [4]. By taking into account how exchange rates affect US multinational corporations, Jorion is able to pinpoint major disparities between industries [5]. Exchange rate changes have a less impact on developed nations than they do on emerging or developing nations [5]. ...
... By taking into account how exchange rates affect US multinational corporations, Jorion is able to pinpoint major disparities between industries [5]. Exchange rate changes have a less impact on developed nations than they do on emerging or developing nations [5]. ...
This paper studies the impact of the Federal Reserve's interest rate policy on American companies, taking Tesla as evidence. Data on the Tesla stock as well as the USD/RMB exchange rate for the previous year were gathered. The impact of a rising exchange rate on companies goes in two directions. On the one hand, the appreciation of the dollar means the depreciation of foreign operating income, and the depreciation of the domestic currency is bad for exports. On the other hand, it will affect how the stock market operates. An increase in dollar holdings in international financial markets would increase the demand for stocks, which would increase stock prices. The conclusion is that the Fed's interest rate policy to control inflation in the United States has, to some extent, come at the expense of stock market growth. The VAR model and ARMA-GARCH model were used to model and analyze the data, and forecast the trend of the company's stock price, then make recommendations for policymakers and investors. For policymakers, it is necessary to adjust the policy appropriately to minimize the volatility of stock market returns, and investors should turn to assets with lower risk instead of blindly investing.
... For instance, Jorion (1990) looks into the exposure of US firms to foreign currency risk and shows that the co-movement between stock returns and the value of the dollar is positively related to their percentage of foreign operations. Allayanis and ...
... Ofek (2001) confirm the results of Jorion (1990) and, in addition, show evidence that firms use foreign currency derivatives to reduce their sensitivity to exchange rate movements (rather than to speculate). Dominguez and Tesar (2006) examine the relationship between exchange rate movements and firm market value across eight industrialized and emerging countries. ...
This dissertation consists of three independent essays that examine key aspects of quantitative asset management: alpha, crowding risk, trading costs and the related topic of capacity.The first essay studies the anatomy of a typical equity quantitative trading strategy. Using company-level data on geographic sales, we show that stock prices do not respond immediately to currency shocks: prices take about two weeks to integrate them. This is true for small to medium size shocks but not for larger shocks, in line with a bounded rationality interpretation. The second essay develops a model whose aim is to study the relationship between crowding and liquidity shocks. One of the main results of that model is that crowding is associated with a larger exposure to broader liquidity shocks on arbitrageurs. We confirm this link empirically by studying equity long/short strategies. We use short interest data both to identify liquidity shocks impacting sophisticated equity investors and to infer crowdedness for some of the well-known long/short equity factors. When liquidity shocks occur, crowded strategies indeed tend to under-perform.In the last essay, I investigate the impact of integrating the recently documented "slow decay" of market impact on the capacity of long/short equity trading strategies. Resulting capacity estimates are orders of magnitude lower than shown in previous studies.
... They found a very weak association between the US stock market and exchange rates. (Jorion, 1990) determines significant differences across industries by considering the impact of the exchange rate on US multinational firms. The developed countries have experienced less exposure to exchange rate movements as compared to developing or emerging countries. ...
... Prices misbehave because many "noise traders" violate Bayes' Theorem and overreact to new information. Rational "information traders" can do little to counterbalance the behavior of noise traders and they may not want to, anyway (De Long et al. 1989, 1990. As a result, prices overshoot. ...
... Soenen and Hennigan (1988) used monthly data of the US stock market index and the US dollar's effective exchange rate from 1980 to 1986 to report a considerable negative relationship. Furthermore, Jorion (1990) discovered a moderate correlation between the effective US dollar exchange rate from 1971 to 1987 and the stock returns of US multinational corporations. ...
... Further, significant spillovers have been detected from Japan and the United States to many other Pacific-Basin equity markets (Ng, 2000). However, Bartov and Bodnar (1994) and Jorion (1990) confirmed that the US dollar movements have no significant relationship with the stock returns of US firms. Erdogan et al. (2020) found that only Turkey showed evidence of a volatility spillover effect from the Islamic stock market to the foreign exchange market, out of the three countries examined (India, Malaysia, and Turkey). ...
Our study focused on exploring the volatility spillover between foreign currency and stock markets, as well as the price dynamics of financial instruments traded in South Asian countries. We use daily data from 2001 to 2021 on the closing exchange rates of local currency to the US dollar and closing stock price indices of these countries. To capture the volatility spillover effect, we utilized the GARCH-BEKK model and used Granger Causality test results to test the price dynamics of these markets. Our findings revealed that the own volatility shocks significantly affect current market behavior and volatility effects spill over bi-directionally between foreign exchange rates and stock price indices in these countries. This study provides valuable insights for both domestic and international investors to understand the South Asian stock and foreign exchange markets, enabling them to make more efficient investment decisions based on the best market conditions.
... Ulusal para değer kayıplarının ihracat kanalı üzerinden olumlu performans etkilerinin yanı sıra döviz kurlarındaki önemli değişimler ve dalgalanmalar reel sektör üzerinde kur riski sorunlarına da yol açabilmektedir. Reel sektör firmalarının kur etkisine açıklık (exchange rate exposure) sorunları literatürde esas olarak döviz kurundaki değişimlerin firma nakit akımları ve firma değeri üzerindeki etkileri üzerinden incelenmektedir (Adler & Dumas, 1984;Jorion, 1990). Kurdaki değişimler firmanın nakit akımlarını ve firma değerini olumsuz yönde etkiliyorsa firmanın kur etkisine açık olduğu veya kur etkisine maruz kaldığı söylenebilir. ...
Döviz kuru değişimlerinin reel sektör üzerindeki etkisi sadece ulusal para değer kayıplarının neden olduğu genişletici bir rekabetçi etki ile sınırlı değildir. Özellikle yüksek düzeyde döviz cinsinden borcu olan, yani borç dolarizasyonu yaşayan şirketler için bilanço etkisi büyük bir risk kaynağıdır. Döviz kuru artışları, borçların ulusal para cinsinden değerini artırarak riskleri artırabilir. Türk reel sektörü de yüksek borç dolarizasyonu ve ulusal para değer kayıpları nedeniyle önemli bilanço kaynaklı risklerle karşı karşıyadır. Bu çalışmada borç dolarizasyonu ve döviz kuru değişimlerinin sektörel performansın en temel göstergesi olan yatırımlar üzerindeki etkisi araştırılmakta, Türkiye için 2009-2022 dönemine ilişkin 76 alt sektör verisinden yararlanılarak “bilanço etkisi” ve “rekabetçi etki” kanalları GMM tahmincisi ile analiz edilmektedir. Elde edilen bulgulara göre, kısa vadeli döviz cinsi borçlardan kaynaklı olarak reel sektör anlamlı bir negatif bilanço etkisine maruz kalırken, uzun vadeli döviz cinsi borçların yatırımlar üzerinde anlamlı etkileri bulunamamıştır. Rekabetçi etki kanalına ilişkin de anlamlı bulgular söz konusu değildir. Dolayısıyla Türk reel sektörünün bilançosundaki kırılganlıklar, politik karar alıcılar açısından Türk lirasının değerindeki beklenmedik kayıplardan kaçınmayı gerekli kılmaktadır.
... The relationship between investors' choices and exchange rate volatility are quite evident. At a micro level it is argued that exchange rates affect the portfolio of domestic and foreign investors like if exchange rate increases the profits of firm fall and eventually the stock prices of the firm also go down (Jorion (1990). At macro-level, increase in exchange rate influence the sentiments of investors adversely because it sends unpleasant signals to the investors and bound them to act cautiously as a result to which investors pull back their money from the investment avenues both arguments reflect that, there exists a negative relation between exchange rate and investors' preference for investing. ...
One of the most crucial areas of economic study at the present time is economic growth.
It's noteworthy to note that the development of the economy's production possibility
frontier is one of the factors promoting long-term economic growth. For countries that
guarantee the expansion of employment, sustainable growth, social welfare, and quality of
life, innovation is thus the most important component. This paper's objective is to present
an outline of innovation and its contribution to India's economic growth. This study is
based on the secondary sources of data and investigates the impact of innovation on
economic growth of India. The time series data for the years 1996 to 2022 are used in this
investigation. From an economic perspective, the 1990s were chosen since this decade
saw the emergence of the so-called "New Economy" in this particular year. In this
analysis, Gross Domestic Product (GDP) growth rate, Per capita GDP growth rate,
research& development (R&D) expenditure as percentage of GDP, Education expenditure
as a percentage of GDP and number of patents variables are used. The result shows the
positive but insignificant effect of research & development, education and GDP per capita
growth rate on economic growth. However, number of patents shows the negative effect
on economic growth in India. That is opposite of expectation. It is recommended that
Government should support R &D and education sector and spend more money because
they contribute to India's long-term sustainable economic growth.
... Stone (1974) sistematik piyasa riskini ve sistematik faiz oranı riskini ölçmek ve bankaların sermaye ve borç piyasalarındaki dehişikliklere karşı ne kadar savunmasız olduklarını göstermek amacıyla iki faktörlü bir CAPM modelini geliştirmiştir. Başka bir çalışmada Jorion (1990) döviz kurlarının aşırı oynaklıhının altını çizerek uluslararası para piyasalarını diher bir sistematik risk kaynahı olarak tanımlamaktadır. Sharpe (1964) çeşitlendirilemeyen sistematik riskleri çeşitlendirilebilir sistematik olmayan risklerden ayırırken, banka iflasının başlıca kaynahının sistematik risk olduhunu vurgulamaktadır. ...
ZET Bankacılık sektörünün deheri piyasa riskine maruz kalma oranına bahlıdır. Bankalar birbirlerinden oldukça farklı risklere maruz kalmaktadırlar. Genel olarak bankacılık sitemi borç. sermaye ve döviz piyasası gibi üç riske maruz kalmaktadır. Bu risklere ilave olarak banka iflasları da bir riskdir ve bu riski ölçmek için Z risk endeksi geliştirilmiştir. Z risk endeks skoru bir bankanın borcunun ödeyememe (temerrüt) olasılıhı kavramı üzerine tasarlanmıştır. Yüksek Z risk endeksi bankaların iflas olasılıhının daha düşük olduhunu göstermektedir. Bu çalışma 2006 Aralık-2022 Haziran döneminde Borsa İstanbul'da işlem gören Türk bankaları-nın hisse senedi fiyatı ile iflas riski arasındaki ilişkiyi belirlemeyi amaçlamaktadır. Ayrıca iflas riski göstergesi olan Z risk endeksi-nin Türk bankacılık sektöründeki geçerlilihi incelenmiştir. Panel Regresyon sonuçları iflas göstergesi olarak kullanılan Z risk en-deksinin istatistiksel olarak %5 düzeyinde anlamlı ve geçerli olduhunu göstermiştir. Ayrıca Kredi/Mevduat, Özsermaye/Toplam Aktifler ve Nakit Akışı/Toplam Aktifler oranları ve Reel Efektif Döviz Kuru hisse senedi fiyatı üzerinde etkilidir. Anahtar Kelimeler: Bankacılık. İflas Riski. Z Risk Endeksi. Panel Veri Analizi. Türkiye ABSTRACT The market value of the banking sector depends on its exposure to market risk. Banks are exposed to quite different risks from each other. Banking system is exposed to three risks such as debt, capital and foreign exchange market in general. In addition to these risks, bank insolvencies are also a risk and the Z risk index has been developed to measure this risk. The Z risk index score is designed on the concept of the probability of a bank's debt default. A high Z risk index indicates that banks are less likely to go bankrupt. This study aims to determine the relationship between the stock price of Turkish banks traded in Borsa Is-tanbul and the risk of bankruptcy in the period of December 2006-June 2022. In addition, the validity of the Z risk index, which is an indicator of bankruptcy risk, in the Turkish banking sector has been analyzed. Panel Regression results show that the Z risk index used as an indicator of bankruptcy is statistically significant and valid at the 5% level. Also, the ratios of Loans/Deposits, Equity/Total Assets and Cash Flow/Total Assets and Real Exchange Rate have effects on the stock price. GİRİŞ 2008 küresel kriz ve ardından meydana gelen büyük resesyon bankacılık sisteminde istikrarın anlaşılması ve analiz edilme-sinde faizi yeniden gündeme getirmiştir. Subprime (alt gelir grubu) krizi olarak da nitelenen küresel kriz birçok uluslararası finan-sal piyalarda büyük bir karmaşaya neden olmuş ve Lehman Brothers-Merrill Lynch gibi uluslararası finansal kuruluşların iflas etmesine neden olmuştur. Açgözlü yatırımcı davranışları ve kontrol-denetim yetersizlihi finansal piyasalarda büyük kaos ve karmaşaya neden olmuştur (Ben Jabra vd., 2017). Büyük belirsizlik olarak karakterize edilen büyük finansal krizler sonucunda sis-temin istikrarı için uygun düzenleyici ölçüler ve düzenleyici politikaların yaygınlaştırılması gerekmektedir. Son küresel kriz riskli bankaların başlangıçta tanımlanmasının ülkelere sorunları daha düşük maliyetle çözme imkânı sahlayacahını göstermiştir. Ban-kaların riske olan duyarlılıhını gösteren en temel göstergelerin bankanın kendi kapitalizasyonu ve büyüklühü olduhu ortaya ko-nulmuştur (Afonso vd., 2014).
... اساس بر مثال، عنوان به .) ( مطالعات Omolara, 2010 ( و ) Jorion, 1990 ...
... Further, Ho and Odhiambo (2018) explained that foreign exchange rate has a positive and significant impact on stock market development, particularly in the short run. The same conclusions were presented in the US by Jorion (1990) and Aggarwal (1981), in Japan by Mukherjee and Naka (1995), and in Nepal by Joshi (2008). ...
The study analyzes the short and long-run relationship between the Philippine Stock Exchange Index and macroeconomic variables industrial production rate, inflation rate, interest rate and foreign exchange rate. In particular, the paper examines secondary data from January 2009 to December 2019 with the use of Autoregressive Distributed Lag (ARDL) to estimate causality function; F-Bounds Test and Wald Test to confirm long-run relationship; and Error Correction Term (ECT) to determine the adjustment of short-run errors towards long-run equilibrium. The results show that industrial production rate and interest rate have a significant negative long-run and positive short-run relationship, respectively, while the foreign exchange rate has both significant positive short-run and negative long-run correlation with the stock market.
... The relationship between the currency market and the stock market has been the subject of an inconclusive result. Some of the research findings concluded no significant relationship between these two markets (Bartov & Bodnar, 1994;Jorion, 1990). The others showed a significant long-term relationship between exchange rate and stock prices (Bartram, 2004;Islam et al., 2007). ...
This paper investigates the impact of foreign fund’ flow on the Indonesian stock index incorporating other variables, namely the international stock market, gold price, foreign exchange rate, and the oil price. GJR-GARCH (1,1) model is used to analyze daily time-series data on IDX, foreign fund flows, the S&P 500, and gold, currency, and oil prices from 2014 to 2019. There is an evidence of leverage effect. It means that there is an asymmetric news impact on the conditional variances. Currency and oil prices are the only variables to have an impact on the Indonesian stock market index, while the rest of the variables do not influence the index. The government may provide infrastructures to attract foreign investors. At the same time, the government has to issue the policy that will protect the economy from stock market shocks. Finally, investors may include gold in their portfolio to diversify their investments.
JEL Classification: G120, G10, G40
... 8 En este contexto, Frankel y Froot (1986, 1988, usando encuestas para los participantes en el mercado realizadas por Money Market Services, Inc. y Financial Report, encuentran evidencia de que los métodos propios del análisis técnico son las principales herramientas en la formación de las expectativas cambiarias de corto plazo. Allen y Taylor (1990 y 1992) analizan la influencia de los métodos de tipo técnico en el mercado de divisas de Londres y concluyen que, en el corto plazo, el 90% de todos los 7 Esta idea se sustenta en la evidencia de una correlación positiva entre el tipo de cambio y el valor en libros (Jorion 1990). Aunque, para monedas sujetas a arbitraje, este efecto podría estar sobreestimado, dado que la exploración del comportamiento del tipo de cambio, a través del análisis de micro datos, sugiere que el arbitraje es limitado y, por tanto, que la gestión del riesgo cambiario permite controlar la exposición a la volatilidad cambiaria. ...
Este artículo evalúa las implicaciones en el corto plazo de las expectativas cambiarias en mercados de crédito, afectados por problemas de selección adversa, y modela un mercado de crédito donde los contratos de deuda son contingentes en el ingreso de los prestatarios. Los activos riesgosos que estos últimos poseen están denominados en moneda extranjera y su valor en libros, estipulado en los contratos de deuda, se traduce usando las expectativas sobre el tipo de cambio basadas en las premisas del análisis técnico. Este artículo muestra que la información pública, generada por la tendencia adversa del tipo de cambio, mueve al mercado de crédito hacia un equilibrio donde la inversión y el crédito se contraen, y definen el espacio para la intervención del gobierno. En este contexto, el gobierno responde a la información generada por la tendencia del tipo de cambio e incrementa el tamaño de programa, a fin de estabilizar las variaciones en la tasa de interés, lo cual evita que la inversión y la liquidez se reduzcan.
... In Vietnam, exporting and trading companies are opened very fast. Choi and Prasad (1995), Jorion (1990) or Gentry and Bodnar (1993) found exchange rate movement does not affect big and transnational companies, especially production companies in the US while Aggarwal and Harper (2010), or John et al. (2003) believe that there is great exchange rate sensitivity. Taking this into consideration, this study in the context of Vietnam is carried out in order to understand more such question. ...
Most of previous studies about exchange rate exposure focus on big international and trading companies in developed markets that are proved to exist. This paper uses Vietnam as a developing market and examines a sample of domestic companies to see whether they are influenced by exchange rate risks. As expected, Vietnamese domestic companies are influenced by exchange rate exposure with the fluctuations of USD, EUR and JPY during the period 2011-2018 with significant relationship with EUR, JPY and no relationship with USD. No industry effect is shown in this study. The results have useful implications for individual investors, domestic company managers and policy makers.
... The result of this paper displays that the exchange rate of US dollar against offshore RMB can negatively impact Tesla's stock price, and the change of exchange rate did not increase the volatility of Tesla's stock return. According to Jorion's research on the exchange rate exposure of US multinationals, industries such as Chemicals, Mining and Retail have considerable exchange rate exposure, but the research involve little about the automobile and new energy industry [12]. From Hyde's research, the exchange rate beta, the sensitivity of asset returns to exchange rate risk, varies according to the country and industries [13]. ...
A series of grave problems caused by energy scarcity and environmental pollution have gradually become the focus of governments and automobile manufacturers, and all countries agree that energy saving, and emission reduction are the inevitable directions of the future development of industrial automobile technology. As a global pioneer of new energy pure electric vehicles, Tesla has created a new concept of using Internet thinking to produce cars. At the same time, under the influence of the epidemic disturbance and the conflict between Russia and Ukraine, the supply and demand of global commodities such as crude oil and grain are tense. In addition, the Fed has raised interest rates for three rounds since June 2022, leading to rising inflationary pressure in the global market. Rising cost pressure in industries with a high degree of global value chain integration (such as automobiles, batteries, and mechanical equipment) and Tesla's earnings are also affected by exchange rate fluctuations. This paper uses the VAR model to explain the dynamic relationship between the exchange rate of USD/offshore RMB and Tesla stock price, establishes the ARMA-GARCH model to predict and analyze how the change of exchange rate affects the volatility of Tesla stock returns, and predicts the impact on industrial enterprises like Tesla.
... The study adopts the two-factor model proposed by [1] and [21] to measure the sensitivity of firms value to currency exchange rate fluctuation. Therefore, the following is the OLS model specification used in this study to measure the degree of currency exposure; ...
... Further, a co-integration test was performed to examine the relationship which provided only limited evidence to prove any such relationship in the long run. On contrary, Jorion (1990) argued that the impact the exchange rate exerts on US multinational companies depends on the industry. In the long and short run, Stavarek (2004) examined the monthly stock prices and exchange rates in four old and four new EU member countries. ...
All the nations around the world are interrelated and interdependent through economic, cultural, social, and, technological means. The foreign exchange market and the stock market are the driving forces of global interdependency. Thus, the study aims to analyze the nature of the relationship between foreign exchange rates and the stock market performance in the Sri Lankan context. The study adopted a quantitative research approach where publicly available secondary data from the Central Bank of Sri Lanka and the Colombo Stock Exchange were used for the analysis. All Share Price index was used as the dependent variable and the monthly average exchange rates; USD/LKR, GBP/LKR, EUR/LKR, JPY/LKR, and INR/LKR were used as the independent variables. The study gathered data for 19 years from Jan’2000 – Jan’2019, where the data set was tested for unit root, and given the non-stationary nature of data; the Johansen co-integration rank test was applied. The study findings depict a non-significant relationship between the exchange rates and the stock market performance in the Sri Lankan context emphasizing the absence of a long-term relationship. This is of paramount importance for both local and foreign investors given the decisions on foreign exchange risk hedging and the portfolio performance depend on this relationship. To the best of our knowledge, this is one of the early studies in Sri Lanka to identify the association between exchange rates and stock returns over a period of 19 years.
... Secara empiris, Jorion (1990), dan Bartov dan Bodnar (1994) gagal menemukan hubungan kontemporer yang signifikan antara pergerakan dolar AS dan pengembalian saham untuk perusahaan-perusahaan AS. Griffin dan Stulz (2001) menemukan bahwa guncangan nilai tukar mingguan memiliki dampak yang dapat diabaikan pada kinerja industri untuk enam negara industri. ...
... İlgili literatür, faiz riskine benzer biçimde kur riskinin sektörel karlılıklar üzerindeki etkisinde de bir uzlaşıya sahip değildir. Jorion (1990), Bartov and Bodnar (1994), El-Masry ve diğ. (2007) (2019), foreks piyasalarında yapılan türev işlemlerin yatırımcılara döviz kuru yönetimi konusunda fayda sağladığını ortaya koymaktadır. ...
Çalışma, kur ile faiz getiri ve değişkenliğinin bankacılık, sanayi, hizmetler ve teknoloji sektörlerinin performanslarına etkisini GARCH modeli aracılığıyla incelemektedir. Faize karşı hiçbir sektör getirisi duyarlı değilken; faiz riskindeki artış, hizmetler sektöründeki getiri değişkenliğini azaltmaktadır. Kurdaki bir artışa karşı bankacılık sektör getirisi negatif etkilenirken; diğer tüm sektör getirilerinin duyarsız olduğu tespit edilmiştir. Kur riski ise, sektörel getiri değişkenlikleri üzerinde artırıcı etkiye sahiptir. Kur riskindeki artış en çok sanayi sektöründeki getiri değişkenliğini artırmaktadır. Sonuçlar, Türkiye ekonomisinde sektörel karlılık ve bu karlılıktaki oynaklığın özellikle kur değişkenine bağlı olduğunu göstermektedir. Son olarak, GARCH modeli ile elde edilen koşullu varyansa göre, teknoloji sektörü (i) riski en yüksek sektördür (ii) borsaya gelecek yeni bilgiye en duyarlı sektördür.
... In the scenario where there is a deviation from Purchasing Power Parity, the "asset pricing model should contain the risk premium based on the covariance of assets with exchange rates, besides the conventional risk premium based on the covariance with the market return" (Dumas & Solnik, 1995, p 445). Various studies such as Jorion (1990), Bodnar & Gentry (1993), Bartov & Bodnar (1994), Choi & Prasad (1995), Allayannis & Ofek (1997), He & Ng (1998), Pritamania, Shome & Singal (2003), Yuzel & Kurt (2003), Dominguez & Tesar (2005), Solakoglu (2005), Pan & Liu (2012), Erol, Algüner & Küçükkocaoğlu (2013 and Dranev & Babushkin (2014) have used the model that regressed market return and exchange rates on companies' stock return to ascertain companies' exchange rate exposure. Most of the studies used the data of developed economies and only limited studies proved significant foreign exchange risk exposure in company stock return. ...
The growing interdependence of capital markets has increased the global investors' interest in the exchange rate fluctuations. The study tries to examine whether the currency risk exposure is significant in the stock markets of emerging economies, considering the exchange rate regime in the country. The study uses the International Capital Asset Pricing Model to explore the association between currency risk exposure and stock market return in emerging countries. The model considers major stock indices of the selected emerging countries for the stock market return, Morgan Stanley Capital International Emerging Market Index for market return and Real Effective Exchange Rate (REER) indices of the individual economies to assess the exchange rate risk exposure. The significance of currency risk exposure in the stock market is estimated using panel data regression. The study concluded that the stock markets of emerging countries are significantly exposed to currency risk, regardless of the country's exchange rate regime. But the exchange rate regime followed in a country significantly influences the nature of the association between the stock index and exchange rate.
... Following prior research (Gande et al., 2009;He & Ng, 1998;Jorion, 1990;Li et al., 2011), we capture firm internationalization with a dummy variable, ''MNC'', that equals ''1'' if the fraction of firm's foreign sales divided by its total sales is greater than 10%, and ''0'' otherwise. We obtain foreign sales data from the Compustat Segments database. ...
The COVID-19 pandemic has led to economic and health crises (“twin crises”) worldwide. Using a sample of firms from 73 countries over the period January to December 2020, we examine stock price reactions of multinational corporations (MNCs) and purely domestic companies (DCs) to the crisis. We find that, on average, MNCs suffer a significantly larger decline in firm value relative to DCs during the stock market crisis caused by the pandemic with notable heterogeneity in this underperformance across both industry and region. The evidence of MNC underperformance is robust to using abnormal returns, an alternative crisis window, a matched sample that accounts for differences in characteristics between MNCs and DCs, alternative model specifications, and alternative proxies for multinationality. Further analysis on the effect of government responses on the valuation gap suggests that stringent government responses exacerbate MNCs’ underperformance. Finally, we show that a stronger financial system mitigates negative crisis returns, especially under stringent government responses, while real factors, such as the firm’s supply chain, investments in human capital, research and development, exacerbate negative crisis returns. Our findings have important implications for managers of MNCs and government policymakers alike and contribute to studies on the international diversification–performance relation by demonstrating a dark side of globalization during a tail-risk event.
... Some studies have found a significant positive relationship between stock prices and exchange rates (for instance, Aggarwal (1981), Smith (1992), Granger et al. (2000), Phylaktis and Ravazzolo (2005), Muller and Verschoor (2009), Tian and Ma (2010), and Diamandis and Drakos (2011) while others have reported a significant negative relationship between the two. On the other hand, some studies have found very weak or no association between stock prices and exchange rates (for instance, Franck and Young (1972), Bartov and Bodnar (1994), Suriani et al. (2015), Bhattacharya and Mukherjee (2003), Gulati and Kokhani (2012), Gulati and Higgins (2003), Jorion (1990), and Ong and Izan (1999). ...
This chapter examines the intricate task of constructing commodity-based portfolios, which is complicated by the dynamic nature of commodity markets and the various risks involved. It underscores the importance of understanding time-sensitive risks and making well-informed assumptions during the portfolio construction process, particularly due to the unique characteristics of commodity returns. A major challenge highlighted is estimating volatilities in commodity markets, where bid-offer spreads can change swiftly and drastically. By offering insights into overcoming this challenge, the chapter provides valuable guidance for the effective inclusion of commodities in portfolios and mutual funds. Furthermore, the chapter stresses the growing need to measure and manage commodity price risk exposure, especially within large trading portfolios that include a variety of commodities. It introduces a modified machine learning Liquidity-Adjusted Value-at-Risk (L-VaR) method to help report risk exposure, assess risk reduction strategies, and establish optimized trading risk limits. The chapter outlines a comprehensive approach to managing risk-return characteristics in commodity investments by implementing a market risk modeling algorithm and applying reinforcement machine learning techniques. This method considers not only standard market conditions but also crisis scenarios and the effects of time-varying liquidity constraints. The chapter also discusses the practical implications of its findings for commodity portfolio managers, particularly in the context of the 2007–2009 global financial crisis. It highlights the importance of efficient (optimum) and coherent (optimal) portfolio selection within an L-VaR framework and its role in dynamic asset allocation strategies. Moreover, the chapter examines the broader implications of its recommendations, emphasizing the potential of reinforcement machine learning techniques to tackle real-world challenges in financial markets. It highlights the relevance of these techniques in the context of financial technology and big data ecosystems, suggesting their potential to transform commodity trading and portfolio management.
Exchange rate is one of the most important factors affecting the stock returns. Thus, in this study, the relationship between stock returns and exchange rates is discussed significantly. This study investigated the effects of currency shocks on stock returns in Iran. For this end, data related to 52 companies listed in Tehran Stock Exchange during 2007-2012 were used in the study. Also, the generalized Autoregressive Conditional Heteroskedasticity model (GARCH) was used to extract currency shocks. In addition, the panel data approach was addressed to obtain the relationship between currency shocks and stock returns. The results indicate that exchange rate shocks and gross domestic product (GDP) have significant positive effects on Iran's stock market returns. However, the consumer price index has a significant negative effect on stock market returns. The results show that exchange rate shocks and gross domestic product (GDP) have significant positive effects on Iran's stock market returns. However, the consumer price index has a significant negative effect on stock market returns.
Keywords
GARCH Model Stock Returns panel data Currency Shocks
Gotovo neprekidne finansijske neizvesnosti i krize izazvane finansijskim i nefinansijskim faktorima nas podsećaju na neophodnost i značaj literature u vezi sa hedžingom rizika. Nepredvidivost budućih promena deviznih kurseva je jedan od najvažnijih izvora neizvesnosti za preduzeća, bez obzira na to da li posluju u granicama jedne nacionalne privrede ili na globalnom nivou. Devizni rizik, kao izraz te neizvesnosti, može usloviti veoma nepovoljne promene domaće vrednosti nekih pozicija preduzeća ili pokazatelja poslovanja, pa privlači pažnju teorije i prakse.
Budući da promene deviznih kurseva mogu značajno odrediti konkurentnost, novčane tokove i strategijsku orijentaciju preduzeća, izloženost deviznom riziku je strategijski problem koji zahteva strategijski odgovor. S tim u vezi, preduzeća koriste finansijske i operativne strategije. Finansijske strategije podrazumevaju zauzimanje pozicije u valutnom derivatu, sa ciljem smanjenja izloženosti u vezi sa osnovnom pozicijom u stranoj valuti, dok se operativne strategije zasnivaju na razvoju realnih opcija u domenu snabdevanja, proizvodnje i prodaje, sa ciljem optimiziranja izloženosti preduzeća u vezi sa očekivanim novčanim tokovima.
Budući da se teorija i praksa finansija brzo menjaju i unapređuju, ova monografija je pisana u nastojanju da ukaže na strategijske odgovore koje preduzeća mogu da koriste kako bi kontrolisala uticaj deviznog rizika na svoje poslovanje. Imajući u vidu strategijsku dimenziju ovog problema, najviše pažnje je posvećeno analizi i objašnjenju modela za procenu izloženosti i strategijama za hedžing deviznog rizika. Posebno su istaknuti i analizirani pristupi dostupni preduzećima u Srbiji.
Monografija „Hedžing deviznog rizika: razvoj i primena finansijskih i operativnih strategija“ je namenjena stručnjacima koji se u svakodnevnom radu sreću sa deviznim rizikom, studentima ekonomskih fakulteta, ali i svima koji žele da bolje razumeju uticaj deviznog rizika i praktične pristupe hedžingu. U očekivanju da će ova monografija doprineti boljem razumevanju složene problematike hedžinga deviznog rizika, autor je otvoren za konstruktivne sugestije naučne i stručne javnosti.
ARTICLE INFO ABSTRACT Two significant components of financial market in an economy are the stock market and the foreign exchange market. This paper investigates the dynamic interaction between the Nifty Index and Exchange Rate in the Indian financial market from July 1990 to June 2019. Unlike previous studies that have focused on broader terms or specific stocks/indices, this research specifically targets the Nifty index, a crucial benchmark for the Indian stock market. By utilizing daily data and advanced econometric techniques such as Vector Error Correction Models (VECM), the study aims to fill the gap in the literature by providing a comprehensive analysis over a longer timeframe. The hypothesis testing, including ADF test, Johansen Cointegration test, VECM, Impulse Response Function, and Error Variance Decomposition, sheds light on the causal relationship between the Nifty index and exchange rate. The findings reveal bidirectional causality between these variables, highlighting the intricate dynamics at play. This paper contributes to a deeper understanding of how macroeconomic factors, particularly exchange rates, influence stock market performance in India. The results offer valuable insights for investors, policymakers, and researchers, emphasizing the importance of considering the interplay between the Nifty Index and Exchange Rate in financial decision-making.
Background: Although numerous researchers have discovered a negative association between stock-market returns and changes in exchange rates, the literature does not address how external shocks may alter these correlations. Aim: This article investigates the risk synchronisation between stock returns, exchange-rate returns, geopolitical risk (GPR), and global economic policy uncertainty (GEPU) concerning countries within the Southern African Development Community (SADC). Setting: The SADC countries over the period February 2005–August 2021. Methods: The wavelet techniques were used to address the study’s objectives. Results: The bivariate results show that there was a positive interdependence between the stock market and the currency market in Botswana and Mauritius from 2007 to 2012. In South Africa, there is always significant co-movement between the two markets. The partial wavelet shows that, while both increasing GPR and GEPU influence the correlation between stock returns and exchange-rate returns, GPR has a greater impact than GEPU. Finally, the wavelet multiple correlations analysis reveals that the Botswana exchange-rate reaction to shocks is indeterminate, with the ability to lead or lag in terms of how the SADC economies respond to shocks across all-time scales. Conclusion: The findings from the study imply that investors should watch for changes in the GEPU, particularly the GPR, if they are concerned about the stock markets in Botswana, Mauritius, and South Africa. Contribution: This is the first study to evaluate the conditional effect of external shocks on the co-movement of currency returns and stock returns in SADC countries using wavelet techniques.
This paper examines how the exchange rate and stock market volatilities affect foreign direct investment (FDI) in Nigeria, using monthly time-series data from 2000 to 2022. The paper applies a Non-linear Autoregressive Distributive Lag (NARDL) method to capture the asymmetric effects of positive and negative shocks from the real exchange rate volatility (XVOL), the stock market volatility (SMVOL), and the real growth domestic product (RGDP) on FDI. The paper finds that there is a long-run cointegration relationship among the variables and that both positive and negative shocks from XVOL and SMVOL have significant negative effects on FDI in the short and long run. In contrast, positive shocks from RGDP have a significant positive effect on FDI in the long run, but an insignificant positive effect in the short run. These results imply that the Nigerian government should stabilise the exchange rate and the stock market to enhance FDI inflows and economic growth.
Keywords: Foreign direct investment, Exchange rate volatility, Stock market volatility, Nonlinear cointegration, NARDL model, Nigeria
JEL Classification: F21, F31, G15, C32, 055
Çalışma, kur riskinin firmaların finansal performansı, hisse senedi getirileri ve karlılıkları üzerindeki etkisini ampirik olarak incelemeyi amaçlamaktadır. Çalışmada, 2014-2022 yıllarına ait çeyrek dönemlik veriler kullanılarak, BIST Bilişim Endeksi’nde yer alan 23 firma için kur riskinin firma performansına etkisi panel veri yöntemi kullanılarak araştırılmıştır. Kur riski; net yabancı para pozisyonu / özkaynaklar ve net yabancı para pozisyonu/toplam kaynaklar ile firma performansı aktif karlılık, Tobin’s Q oranları ve hisse senedi getirisi ile ifade edilmiştir. Analiz 3 farklı model kurularak gerçekleştirilmiştir. Çalışmada ulaşılan ampirik bulgulara göre kur riskinin firma karlılığını olumsuz, hisse senedi getirilerini olumlu etkilediği sonucuna ulaşılırken firma performansı üzerindeki etkisinin anlamsız olduğu görülmüştür. Aynı zamanda firma hacmi firma karlılığını ve performansını olumlu etkilerken, hisse senedi getirileri üzerindeki etkisinin ise anlamsız olduğu görülmüş. Kaldıraç değişkeninin firma karlılığını ve performansını olumsuz etkilediği, hisse senedi getirileri üzerindeki etkisinin de anlamsız olduğu görülmüştür. Büyüme değişkeninin firma karlılığını olumlu etkilediği, firma performansı ve hisse senedi getirileri üzerindeki etkisinin anlamsız olduğu görülmüştür.
This paper focuses on the impacts of currency value movements on the yield and volatility of U.S. technology multinationals. Difference from most previous researches of this field, we expressly use statistical methods and a few powerful models to show answers to questions that are not yet theoretically clear in this research. Presented by experimental results based on several decades of data of two U.S. technology multinationals, the theoretically unknown profitability effects of exchange rate are revealed by the stock market. Rise in the US dollar, for instance, has positive effects on the yield of the multinationals in the long run, while there is no significant short-term effect of US dollar movements on those firms. And the paper also focuses on the impacts of currency value change on volatility. This implies that the conclusions of this research can be used by policy makers and investors to draw some responses to the fluctuations in the US dollar to reduce losses and increase gains.
In extreme global instability and external shocks, exchange rate volatility and currency risk exposures are among the primary issues for any international and domestic business entity. Moreover, currency risks nowadays have importance for Ukrainian enterprises for two reasons. Firstly, the war and foreseen post-war periods mean dramatic unpredictability and, therefore, the fragility of the economy overall and currency market as well because of various shocks at global and domestic markets, uncertain changes of macroeconomic fundamentals, mainly high inflation rates worldwide. Secondly, domestic companies need extra experience for effective managerial practices in a volatile environment, especially regarding currency risks. However, one can choose the most sufficient organisational tools only after correctly identifying exposures' roots, types, and characteristics, which is usually missing. Therefore, the paper aims to use a structural approach to ensure the correct identification of exposure to currency risk as a component of its assessment within goal-oriented management. Results include theoretical analysis of possible exposures to currency risk of the selected Ukrainian industries, namely the agricultural sector, food production, and defence. Practical implications aim at improving the effectiveness of currency risk management at domestic enterprises through correct analysis of the reasons and types of exposure.
Multinational Corporations involved in international business operations are exposed to movement in the exchange rate. The purpose of this study is to identify the factors that are responsible for exchange rate movements and to assess the impact they have on such organizations using the Nigerian market as a case study. A quantitative research approach and a descriptive ex-post facto research strategy was adopted for this study. During a span of ten years, a sample of exporting and non-exporting sector companies listed in the Nigerian stock exchange are analysed. The findings revealed that the manufacturing company showed a high level of sensitivity with the movement in exchange rate to the returns from the firm compared to the non-manufacturing company, and the correlation analysis indicated the inflation and debt levels to be key factors. The results from the study have revealed significant relationship between some systematic factors and exchange rate movement which can be useful to multinational corporations, government entities, and other key international business stakeholders in Nigeria.
With the development of liberalization of capital movements, an increasing attention has been given to international transmission of volatility to different market returns. This article empirically tests the effects of the volatility in the time value of the US t bills and RBI t bills on the developed, developing, and underdeveloped market. By using daily values of twelve equity markets and the interest rates on the 10 years treasury bills from 2000 to 2010, the Gaussian and Student’s-t GARCH models are tested to display the international Transmission effects of the US and Indian interest rates on the world equity markets. The empirical findings vary between the sub-economy groups. The equity markets in the upper, middle, and lower income group do not have strong interestrate effects. The markets are affected by the volatility in the US and RBI interest rates at low levels. On the other hand, impacts of the volatility in the US interest rates on the domestic money markets –i.e. bond spreads- in the emerging economies are stronger with negative direction.
Although theory predicts that family firms should be less willing to bear risk than nonfamily firms, prior empirical papers have not found support for this prediction. In this paper we focus on conditional currency risk because founding families can relatively easily influence their firms’ currency exposure. We find that family firms have relatively lower conditional currency exposure. This result holds for both descendant‐led and nonfamily‐led family firms. Consistent with purposeful actions of founding families, we find that exposure decreases with control‐enhancing mechanisms, such as excess voting rights. The findings also support a wealth‐preservation motive, evidenced by a finding that exposure declines with the number of family beneficiaries. Additional analysis suggests that family firms achieve the relatively lower risk by reducing internationalization depth and limiting exposure to riskier currencies. Family firms have lower conditional currency exposure than nonfamily firms Results hold for descendant‐led and nonfamily‐led family firms Control‐enhancing mechanisms are negatively associated with exposure Lower risk achieved by reducing internationalization depth and limiting exposure to riskier currencies Family firms have lower conditional currency exposure than nonfamily firms Results hold for descendant‐led and nonfamily‐led family firms Control‐enhancing mechanisms are negatively associated with exposure Lower risk achieved by reducing internationalization depth and limiting exposure to riskier currencies This article is protected by copyright. All rights reserved
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