A firm level analysis of asymmetric response of U.S. stock returns to exchange rate movements

2020 ◽  
Author(s):  
Afees A. Salisu ◽  
Kazeem Isah ◽  
Nnenna Ogbonnaya‐Orji
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Firm Level ◽  
Asymmetric Response ◽  
Exchange Rate Movements ◽  
Level Analysis

Debt composition and exchange rate balance sheet effect in Brazil: a firm level analysis

2003 ◽  
Vol 4 (4) ◽  
pp. 368-396 ◽  
Author(s):  
Marco Bonomo ◽  
Betina Martins ◽  
Rodrigo Pinto
Keyword(s):  
Exchange Rate ◽  
Balance Sheet ◽  
Firm Level ◽  
Level Analysis

scholarly journals Macroeconomic sensitivity and firm level volatility: the case of New York Stock Exchange

2021 ◽  
Vol 19 (02) ◽  
pp. 198-211
Author(s):  
Muhammad Saqib Bashir Butt ◽  
Hasniza Mohd. Taib
Keyword(s):  
New York ◽  
Exchange Rate ◽  
Stock Returns ◽  
Stock Exchange ◽  
Oil Prices ◽  
Yield Spread ◽  
New York Stock Exchange ◽  
Firm Level ◽  
Macroeconomic Factors ◽  
York Stock Exchange

Purpose – This paper investigates whether the macroeconomic factors affect the firm stock returns volatility differently depending on their location in different sectors. For this purpose, daily financial time-series data for 683 firms located in nine US sectors for the period of 2000 to 2017 are employed. Research methodology – The GARCH (1,1) model was applied to each firm located in nine US sectors. The four macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return, are included in both mean and variance equations of GARCH (1,1) model to estimate the effect. Research limitations – This research study is limited to the New York Stock Exchange; therefore, it can be extended to the other economies as well. Further, this study uses one firm feature that is the sectoral location of the firm; it is recommended that some other firm features should be studied to explore the volatility behaviour of firms. In the methodological part, this study does not include the lag effect, since it is recognised in the literature that the investors underreact to public information, so future research can be extended to test the underreaction hypothesis. Practical implications – This study has implications for the investors and policymakers. Since it has emerged from the findings that some sectors are more sensitive than others to macroeconomic changes, so this knowledge will help the investors to diversify their portfolio and policymakers to maintain macroeconomic discipline. Originality/Value – The main contribution of this study is that it undertakes the assumption of heterogeneous nature of firms and conducts a detailed firm level analysis by sector covering a more extended period of time to investigate the impact of four macroeconomic factors, namely, exchange rate, treasury yield spread, oil prices, and market return on firm stock returns, volatility using daily data. Further, this study contributes by including all the macroeconomic factors together as an exogenous variable in mean and conditional variance equations of the GARCH (1,1) model to investigate the effect simultaneously.

scholarly journals Oil Prices and Firm Returns in an Emerging Market

2021 ◽  
Vol 24 (1) ◽  
pp. 166-187
Author(s):  
Esin Cakan ◽  
Sercan Demiralay ◽  
Veysel Ulusoy
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Stock Returns ◽  
Information Diffusion ◽  
Emerging Market ◽  
Oil Prices ◽  
Nominal Exchange Rate ◽  
Oil Price ◽  
Firm Level ◽  
Level Data

This study examines the oil price effect on Turkish stock market as an emerging country on firm level data. After controlling short term interest rate, nominal exchange rate and crude oil price, we find that firms behave differently to a change in oil prices. The findings include these: i) variations in oil prices do not significantly affect Turkish firm returns. Out of 153, only 38 firms are affected significantly by oil price after controlling exchange rate and interest rate; ii) oil prices influence stock returns of Turkish firms, suggesting that under reaction and gradual information diffusion hypotheses may hold. iii) small and middle-sized firms are more affected negatively from oil price changes, where large-sized firms affected more positively. The empirical findings of this study have potential implications and offer significant insights for both practitioners and policy makers.

On resolving exchange rate exposure puzzle: evidence from Chinese stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chu-Sheng Tai
Keyword(s):  
Risk Factors ◽  
Exchange Rate ◽  
Stock Market ◽  
Stock Returns ◽  
Content Type ◽  
Second Moment ◽  
Exchange Rate Exposure ◽  
Exchange Rate Movements ◽  
Asymmetric Garch ◽  
First Moment

PurposeIt has been increasingly recognized that exchange rate changes affect the cash flow and the value of firms. Existing studies on exchange rate exposure do not have much success in finding significant exposure, and the failure to find this relationship empirically has been termed “exposure puzzle”. Motivated by the limited success in detecting significant exchange rate exposure in the extant literature, China's exchange rate regime reform in 2005, the increasing role of China's stock market played in the global financial market and its attractiveness in international portfolio diversification, the purpose of this paper is to resolve the so-called “exposure puzzle” and thus make a contribution to the literature by investigating whether the renminbi (RMB) exchange rate movements have any significant impact on China's stock market from the perspective of US investors who may want to diversify their portfolios with Chinese stocks.Design/methodology/approachSince previous studies which rely heavily on the standard Ordinary Least Squares (OLS) or seemingly unrelated regression (SUR) method of estimation with the assumption of constant variance of firm's or industry's returns do not have much success in detecting significant exchange rate exposure, in this study, we apply an asymmetric GARCH(1,1) with generalized error distribution (GED) model which takes conditional heteroscedasticity and leptokurtosis of asset returns into account in the estimation of first- and second-moment exchange rate exposure.FindingsUsing weekly data over the period August 10, 2005–January 1, 2020 on 40 Chinese sector stock returns, the authors find strong evidence of first-moment exchange rate exposure. In particular, 65% (26 out of 40) of sectors examined have significant first-moment exposures and 73.08% (19 out of 26) of these significant first-moment exposures are asymmetric. For the second-moment exchange rate exposures, they are less frequently detected with 20% (8 out of 40) significant cases. These results are robust to whether an unorthogonalized or orthogonalized bilateral US dollar (USD)/Chinese Yuan (CNY) exchange rate is used in the estimation.Research limitations/implicationsBecause this study concerns only with whether exchange rate movements affect ex post returns as opposed to expected (ex ante) returns, and given the significant exposures with respect to different risk factors found in the study, it is interesting to see if any of these risk factors commands a risk premium. In other words, a natural extension of this study is to test whether any of these risk factors is priced in China's stock market.Practical implicationsThe findings of the study have interesting implications for US investors who would like to diversify their portfolios with Chinese stocks and are concerned about whether the unexpected movements in CNY will affect their portfolio returns in addition to its local and world market risk exposures.Originality/valueThe study extends previous research on the first- and second-moment exchange rate exposure of Chinese stock returns by utilizing an asymmetric GARCH(1,1) with generalized error distribution (GED) model, which has not been fully exploited in the literature.

VOLATILITY OF CRUDE OIL PRICES, FOREIGN EXCHANGE EXPOSURES, AND COMPANY’S PERFORMANCE: EMPIRICAL EVIDENCE FROM TAIWANESE 3PL INDUSTRY

2018 ◽  
Vol 6 (1) ◽  
pp. 53-60
Author(s):  
Hsiao Chiu-Ming ◽  
Chen Chih-Hung ◽  
Lin Chun-Hsuan ◽  
Fang Bo-Wei ◽  
Tang Yen-Ju ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Crude Oil ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Negative Impact ◽  
Oil Prices ◽  
Foreign Exchange Rate ◽  
Firm Level ◽  
Crude Oil Prices ◽  
The Impact

Purpose of the study: In this paper, we investigate the impact of the changes in crude oil prices and fluctuation of foreign exchange rate on the operating performances of Taiwanese 3PL industry.Methodology: Vector Autoregression Models. Through the empirical model, we find that all the 3PL companies are more suffered to the volatility of WTI and Dubai crude oil prices, but Dubai is insignificant to the warehousing companies. In the fluctuations of foreign exchange rate, some have positive effect and some are negative.Main Findings: All the Taiwanese 3PL companies are more suffered to the volatility of WTI and Dubai crude oil prices, however Dubai is insignificant to the warehousing companies. Moreover, we find an interesting result, that is, for some companies operating performance, the impact on the volatilities of crude oil have the same sign but in opposite direction. For example, in our empirical results, the stock returns are positively correlated to volatilities of Dubai and Brent crude oil prices, however, WTI’s volatility has negative impact on them.Implications: It implies that the company can make a “natural hedge” strategy to hedge the crude oil volatility risk by forming a portfolio which pools these three commodities together. In this way, we made recommendations to the company’s decision-making reminding that the company should make a portfolio of foreign exchange and crude oil price fluctuations in the hedge strategy to enhance the company’s risk management operations and to reduce the loss caused by these factors.Novelty/Originality of this study: This study contributes in the existing literature for an empirically study of a firm-level evidence from Taiwanese 3PL companies.

Predicting stock returns using crude oil prices: A firm level analysis of Nigeria's oil and gas sector

2020 ◽  
Vol 68 ◽  
pp. 101708
Author(s):  
Wasiu Adekunle ◽  
Abubakar M. Bagudo ◽  
Monsuru Odumosu ◽  
Suraj B. Inuolaji
Keyword(s):  
Crude Oil ◽  
Stock Returns ◽  
Oil And Gas ◽  
Oil Prices ◽  
Firm Level ◽  
Crude Oil Prices ◽  
Oil And Gas Sector ◽  
Level Analysis

scholarly journals Exchange rate volatility and economic performance in Peru: a firm level analysis

2003 ◽  
Vol 4 (4) ◽  
pp. 472-496 ◽  
Author(s):  
Luis J Carranza ◽  
Juan M Cayo ◽  
José E Galdón-Sánchez
Keyword(s):  
Exchange Rate ◽  
Economic Performance ◽  
Exchange Rate Volatility ◽  
Firm Level ◽  
Level Analysis
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