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Is There a Contemporaneous Relation Between Exchange Rates and Stock Prices? Evidence from Decisions to Allow the Mexican Peso and Thai Baht to FloatKathryn L. DewenterUniversity of Washington - Michael G. Foster School of Business Robert C. HigginsUniversity of Washington - Department of Finance and Business Economics Timothy T. SiminPennsylvania State University March 2002 Abstract: This paper estimates short horizon exchange rate sensitivity with an event study methodology. We look at stock price reactions to very large, unexpected exchange rate changes: the decisions to allow the Mexican peso and Thai baht to float. For both events, we find evidence of a statistically and economically significant contemporaneous relation. Our findings are consistent with the premise that the inability of much of the prior research to observe a contemporaneous relation between exchange rates and company value is due to methodological issues.
Number of Pages in PDF File: 33 Keywords: Exchange rate sensitivity, hedging, price reaction, event study JEL Classification: F3, F4, F2 working papers seriesDate posted: April 18, 2002Suggested CitationContact Information
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