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Imports, Exports, Dollar Exposures, and Stock Returns


Suparna Chakraborty


University of San Francisco

Liuren Wu


City University of New York, CUNY Baruch College - Zicklin School of Business

Yi Tang


Fordham University - School of Business

December 3, 2008


Abstract:     
We measure the dollar risk exposure of U.S. industries by regressing stock portfolio returns on each industry against the returns on a broadly defined dollar index. The exposure estimates vary widely across different industries in both magnitudes and directions. We trace this large cross-sectional variation in dollar exposure to the industry's average import and export activities. We find that the dollar exposure increases with imports but decreases with exports. On average, dollar appreciation helps the stock performance of import-oriented companies but hurts the stock performance of export-oriented companies. Based on this finding, we propose to exploit the information in imports and exports to enhance the identification of the dollar risk exposure and improve the prediction of future stock returns for different industries. We identify a strongly negative risk premium for bearing positive exposures to the dollar. The risk premium moves with the business cycle and becomes more negative during recessions.

Number of Pages in PDF File: 33

Keywords: Dollar risk exposure, imports, exports, currency risk premium

JEL Classification: F31, G12, E32

working papers series


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Date posted: March 21, 2008 ; Last revised: March 16, 2010

Suggested Citation

Chakraborty, Suparna, Wu, Liuren and Tang, Yi, Imports, Exports, Dollar Exposures, and Stock Returns (December 3, 2008). Available at SSRN: http://ssrn.com/abstract=1108002 or http://dx.doi.org/10.2139/ssrn.1108002

Contact Information

Suparna Chakraborty (Contact Author)
University of San Francisco ( email )
2130 Fulton Street
San Francisco, CA 94117-1080
United States
HOME PAGE: http://chakrabortys.weebly.com
Liuren Wu
City University of New York, CUNY Baruch College - Zicklin School of Business ( email )
One Bernard Baruch Way
Box B10-225
New York, NY 10010
United States
646-312-3509 (Phone)
646-312-3451 (Fax)
HOME PAGE: http://faculty.baruch.cuny.edu/lwu/
Yi Tang
Fordham University - School of Business ( email )
113 West 60th Street
Bronx, NY 10458
United States

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