Abstract

http://ssrn.com/abstract=299641
 
 

References (57)



 
 

Citations (25)



 


 



The Impact of the Introduction of the Euro on Foreign Exchange Rate Risk Exposures


Söhnke M. Bartram


Warwick Business School - Department of Finance

George Andrew Karolyi


Cornell University - Johnson Graduate School of Management

August 19, 2010

Journal of Empirical Finance, Vol. 13, Nos.4-5, pp. 519-549, October 2006
EFA 2002 Berlin Meetings Presented Paper

Abstract:     
This paper examines whether the introduction of the Euro in 1999 was associated with lower stock return volatility, market risk exposures and foreign exchange rate risk exposures for 12,821 nonfinancial firms in Europe, the United States, and Japan. We show that though the Euro led to a significant decrease in the volatility of trade-weighted exchange rates of European countries, stock return variances of nonfinancial firms increased after its introduction. However, the Euro was also accompanied by significant reductions in market risk exposures for nonfinancial firms in and outside of Europe. We show that the reduction in market risk was not as a result of changes in financial leverage, and that it is concentrated in firms with a high fraction of foreign sales in Europe, a high fraction of total foreign sales and larger market capitalizations. In addition to its impact on market betas, the Euro has a positive effect on the incremental foreign exchange rate exposures, particularly for multinationals.

Number of Pages in PDF File: 51

Keywords: Foreign exchange rates, exposure, Euro, corporate finance, risk management, derivatives

JEL Classification: G3, F4, F3

Accepted Paper Series





Download This Paper

Date posted: March 16, 2002 ; Last revised: March 11, 2014

Suggested Citation

Bartram, Söhnke M. and Karolyi, George Andrew, The Impact of the Introduction of the Euro on Foreign Exchange Rate Risk Exposures (August 19, 2010). Journal of Empirical Finance, Vol. 13, Nos.4-5, pp. 519-549, October 2006; EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: http://ssrn.com/abstract=299641 or http://dx.doi.org/10.2139/ssrn.299641

Contact Information

Söhnke M. Bartram
Warwick Business School - Department of Finance ( email )
Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)
HOME PAGE: http://go.warwick.ac.uk/sbartram/
George Andrew Karolyi (Contact Author)
Cornell University - Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
Feedback to SSRN


Paper statistics
Abstract Views: 8,263
Downloads: 1,627
Download Rank: 5,065
References:  57
Citations:  25

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.547 seconds