TY - JOUR
T1 - Reexamining the Exchange Rate Exposure Puzzle by Classifying Exchange Rate Risks into Two Types
AU - Kang, Sammo
AU - Kim, Soyoung
AU - Lee, Jeong Wook
N1 - Publisher Copyright:
© 2015 Institute of East and West Studies, Yonsei University, Seoul.
PY - 2016/4/2
Y1 - 2016/4/2
N2 - The “exchange rate exposure puzzle” refers to the phenomenon in which the proportion of firms with significant exchange rate exposure tends to be lower than expected figures. Some studies use changes in exchange rate to indicate exchange rate risks relevant to firm value. However, a different measure of exchange rate risks, which is the volatility in exchange rate changes, can also affect the value of firms because exchange rate uncertainty can affect international trade and investments of firms. This study classifies exchange rate risks into two types, namely, changes in exchange rate and the standard deviation of exchange rate changes, and empirically examines exchange rate exposure of firms in 12 countries. The results suggest that the proportion of firms with significant exchange rate exposure increases substantially, and thus, weakens the exchange rate exposure puzzle when we also count the cases in which the standard deviation of exchange rate changes affects stock return significantly.
AB - The “exchange rate exposure puzzle” refers to the phenomenon in which the proportion of firms with significant exchange rate exposure tends to be lower than expected figures. Some studies use changes in exchange rate to indicate exchange rate risks relevant to firm value. However, a different measure of exchange rate risks, which is the volatility in exchange rate changes, can also affect the value of firms because exchange rate uncertainty can affect international trade and investments of firms. This study classifies exchange rate risks into two types, namely, changes in exchange rate and the standard deviation of exchange rate changes, and empirically examines exchange rate exposure of firms in 12 countries. The results suggest that the proportion of firms with significant exchange rate exposure increases substantially, and thus, weakens the exchange rate exposure puzzle when we also count the cases in which the standard deviation of exchange rate changes affects stock return significantly.
KW - changes in exchange rate
KW - Exchange rate exposure
KW - exchange rate risk
KW - exposure puzzle
KW - standard deviation of exchange rate changes
KW - stock returns
UR - http://www.scopus.com/inward/record.url?scp=84939172862&partnerID=8YFLogxK
U2 - 10.1080/1226508X.2015.1072730
DO - 10.1080/1226508X.2015.1072730
M3 - Article
AN - SCOPUS:84939172862
SN - 1226-508X
VL - 45
SP - 116
EP - 133
JO - Global Economic Review
JF - Global Economic Review
IS - 2
ER -