Static and Time-Varying Foreign Exchange Rate Exposure Estimation Methods
Independent thesis Advanced level (degree of Master (One Year)), 20 HE creditsStudent thesis
This study examines the contingency of foreign exchange rate exposure and its antecedents onmodelling techniques utilized in previous literature. Based on a sample of 567 US non-financiallisted companies the analysis reveals that only 11.29% of firms face exposure to the US$ tradeweightedcurrency index when Jorion’s equation is run. By orthogonalizing market returns,allowing time variation in specifications, and applying both approaches simultaneously, it isshown that 49.56%, 73.72%, and 99.64%, respectively, of sample firms are significantly exposedto the US$ trade-weighted exchange rate variable. The paper also highlights the dependency ofexposure sources on empirical representations, insofar as cross-sectional estimation yieldsfeeble results, while panel estimation indicates significant causality for several explanatoryvariables.
Place, publisher, year, edition, pages
2016. , 26 p.
IdentifiersURN: urn:nbn:se:uu:diva-280137OAI: oai:DiVA.org:uu-280137DiVA: diva2:910152
Master Programme in Business and Management