Exporters’ Exposures to Currencies: Beyond the Loglinear Model*

2015 ◽  
Vol 20 (4) ◽  
pp. 1631-1657 ◽  
Author(s):  
Kris Boudt ◽  
Fang Liu ◽  
Piet Sercu
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Real Option ◽  
Positive Impact ◽  
Constant Elasticity ◽  
Exporting Firms ◽  
Exchange Rate Exposure ◽  
The Exchange Rate ◽  
Exchange Rate Level ◽  
Smooth Transitions

Abstract We extend the constant-elasticity regression that is the default choice when equities’ exposure to currencies is estimated. In a proper real-option-style model for the exporters’ equity exposure to the foreign exchange rate, we argue, the convexity of the relationship implies that the elasticity should depend on the exchange rate level. For instance, it should shrink to zero when the option to export becomes worthless, and that should happen at a critical exchange rate that is still strictly positive. We propose a class of tractable multi-regime regression models featuring, in line with the real-options logic, smooth transitions and within-regime dynamics in the foreign exchange exposure. We then analyze the exchange rate exposure of Chinese exporting firms and find that the model in which the moneyness of the export option has a positive impact on the exchange rate exposure detects a significantly positive and convex exposure for 40% and 65% of the firms depending on whether the market return is included in the regression or not.

Exchange-Rate Exposure of Taiwanese Exporting Firms

2000 ◽  
Vol 03 (02) ◽  
pp. 201-233 ◽  
Author(s):  
Chaoshin Chiao ◽  
Ken Hung
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Firm Size ◽  
Exchange Rate Risk ◽  
Time Varying ◽  
Exporting Firms ◽  
Exchange Rate Exposure ◽  
Rate Risk ◽  
The Exchange Rate ◽  
The Government

The purpose of this paper is to investigate the exchange-rate exposure of Taiwanese exporting firms. Particularly, we consider the effects of the timing of the three liberalization events through which the government carried out explicit policies to open gradually its foreign exchange and stock markets. First, we cannot corroborate that most exporting firms are individually exposed to exchange-rate risk. However, we cannot reject that the exporting firms are jointly exposed to exchange-rate risk in all sub-periods. Second, the timing of the three liberalization events greatly affects the exchange-rate exposure of Taiwanese exporting firms. Finally, the determinants of possibly time-varying exchange-rate exposure of exporting firms are exports-to-sales ratio, firm size, and the timing of the three liberalization events.

The Effectiveness of Fed Intervention on the USD/DM Foreign Exchange Market

2006 ◽  
Vol 6 (2) ◽  
pp. 1850088 ◽  
Author(s):  
Zhaodan Huang ◽  
Stephen Neun
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Policy Option ◽  
Exchange Market ◽  
Event Window ◽  
Study Approach ◽  
Exchange Rate Movements ◽  
The Exchange Rate ◽  
Exchange Rate Level

This study empirically examines the effectiveness of Fed intervention on the USD/DM exchange market using an event study approach. The event window is defined as 4 (8) days prior/post an intervention. Based on the empirical analysis, the results show that when the Fed follows an "against the wind" policy, exchange rate movements are smoothed and may switch direction. The results are robust and hold for different event window definitions and sample ranges. To test whether the results are due to the exchange rate movement itself, we conduct a simple test using customer trades by the Fed. The results do not exhibit a systematic pattern. We also find that a joint intervention has a stronger impact on the exchange rate level when the Fed buys US dollars. The policy implication of our findings is that intervention in foreign exchange markets on the part of the Fed to impact the value of the US dollar is a viable policy option.

scholarly journals Derivatives Use In The Partial Hedging Of Currency Risk: A Firm-Specific Approach To Understanding The Exchange Rate Exposure Puzzle

2010 ◽  
Vol 26 (1) ◽  
Author(s):  
Olesya Savchenko ◽  
Stephen Makar
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Currency Risk ◽  
Hedging Strategy ◽  
Accounting Data ◽  
Exchange Rate Exposure ◽  
Partial Hedging ◽  
The Exchange Rate ◽  
Current Financial Crisis

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="color: black; font-size: 10pt;"><span style="font-family: Times New Roman;">This study investigates whether firms with significant foreign exchange rate exposure change their future use of foreign exchange rate derivatives (FXDs). Unlike prior research, we employ firm-specific accounting data on hedging strategy and currency risk. Our results indicate that firms with high FXDs use relative to their foreign sales have significant exposure to either firm-specific bilateral exchange rates or a broad exchange rate index. Among such firms with significant foreign exchange rate exposure, we find that partial hedgers change their future use of FXDs, consistent with our expectations for firms that monitor the effectiveness of their hedging strategy. These results are timely in light of the increased scrutiny of derivatives use during the current financial crisis, and contribute to our understanding of extant research on returns-based estimates of foreign exchange rate exposure (aka, the exchange rate exposure puzzle).</span></span></p>

Foreign Exchange Exposure of Indonesian Listed Firms

2019 ◽  
Vol 21 (4) ◽  
pp. 918-936 ◽  
Author(s):  
Nurul Anisak ◽  
Azhar Mohamad
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Cash Flows ◽  
Listed Firms ◽  
Exchange Rate Exposure ◽  
Exchange Rate Movements ◽  
Foreign Exchange Exposure ◽  
The Exchange Rate ◽  
Future Cash Flows

Foreign exchange exposure or exchange rate exposure is the risk that a firm’s cash flows and earnings may be affected by exchange rate movements. For multinationals that have several subsidiaries overseas, exchange rate movements may have an adverse effect on a huge number of contractual transactions. The exchange rate movements may have an impact on future cash flows, generated by the firm’s production and marketing operations. For example, a rising Indonesian rupiah may result in Indonesian goods becoming more expensive, leading to Indonesian exporters selling less in the future, resulting in unfavourable future cash flows. Lower future cash flows mean the firm’s stock valuation may decline and investors may not be attracted to investing in the firm’s stock. In this paper, we examine the effect of exchange rate movements on Indonesian listed firms’ stock prices using a multivariate model with six bilateral exchange rates. We further add a generalized autoregressive conditional heteroskedasticity (GARCH (1,1)) model for each of 100 Indonesian listed firms’ monthly closing prices from the period of January 1994 through to November 2015, and the GARCH (1,1) results are summarized and presented in Tables 1 – 4 , 7 and 8 . We find a total of 80 per cent of our sample firms to have significant exchange rate exposure. The overall results show that most of the Indonesian listed firms under study are exposed to Japanese yen, Great Britain pound and Malaysian ringgit. We posit that this sensitivity of their stock prices may be due to the fact that most of these Indonesian firms are net importers. Interestingly, the agricultural sector comes out as the most stable sector, having the least exposure and exhibiting stable performance during the Asian financial crisis of 1997/1998. For overall exchange rate exposure across all firms, we run a pooled generalized least squares model. We find that the exchange rate exposure of the Indonesian sample firms is time-variant, or in other words, very much dependent on the subperiods (before crisis, during crisis and after crisis) under study.

An Empirical Analysis of Foreign Exchange Exposure of CNX 100 Companies

GIS Business ◽  
2017 ◽  
Vol 12 (5) ◽  
pp. 1-9 ◽  
Author(s):  
Sriram Mahadevan
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Future Research ◽  
Export Ratio ◽  
Exchange Rate Exposure ◽  
Ratio Size ◽  
Foreign Exchange Exposure ◽  
Exchange Rate Changes

The present study has empirically examined the level of foreign exchange exposure and its determinants of CNX 100 companies. For the purpose of study, the relationship between exchange rate changes and stock returns for a sample of 82 companies was determined for the period April 2011-March 2016. The study finds that 49% of the sample companies had significant positive foreign exchange rate exposure and the found that the companies could be exporters or net importers. To explore factors determining foreign exchange rate exposure, variables such as export ratio, import ratio, size of a company, hedging activities were regressed against the exchange exposure and the study found that none of the factors was influencing the exchange rate exposure. The study concludes that the reasons for insignificant influence of the variables could be the natural hedging practices of companies, offsetting of exports and imports and heterogeneous of the sample size. The study offers few directions for future research in this area.

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

2021 ◽  
pp. 227853372110337
Author(s):  
Zakiya Begum Sayed ◽  
J. Gayathri
Keyword(s):  
Exchange Rate ◽  
Multinomial Logistic Regression ◽  
Exchange Rate Volatility ◽  
Strategic Decision ◽  
Firm Level ◽  
Factors Affecting ◽  
Business Operations ◽  
Industrial Sectors ◽  
Exchange Rate Exposure ◽  
The Exchange Rate

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

scholarly journals The Foreign Exchange Rate Exposure of Nations

2009 ◽  
Vol 22 (2) ◽  
pp. 339-353 ◽  
Author(s):  
Horst Entorf ◽  
Jochen Moebert ◽  
Katja Sonderhof
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Exchange Rate Exposure
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