Download This PaperForeign Exchange Exposure and Cost of Equity for US Companies: Local Versus Global CAPM
Journal of Applied Finance, No. 1, 2011
24 Pages Posted: 15 Nov 2009 Last revised: 17 Apr 2018
There are 2 versions of this paper
Foreign Exchange Exposure and Cost of Equity for US Companies: Local Versus Global CAPM
Foreign Exchange Exposure and Cost of Equity for US Companies: Local Versus Global CAPM
Date Written: April 5, 2010
Abstract
For U.S. firms with extreme foreign exchange (FX) exposure levels, we ask whether the single-factor global CAPM yields significantly different cost of equity estimates from the local CAPM. For a sample of U.S. firms from 2000-2007, we find a clear and statistically significant relation between the differences of the two models’ cost of equity estimates and the firms’ FX exposure estimates. However, the economic significance is questionable, even for firms with extreme FX exposure levels.
Keywords: Global CAPM, Local CAPM, Cost of Equity, Foreign Exchange, Exposure
JEL Classification: F3, G1, G3
Suggested Citation: Suggested Citation
Walter Dolde
University of Connecticut - Department of Finance ( email )
School of Business
One Univesity Place
Stamford, CT 06901-2315
United States
203-301-0806 (Phone)
Carmelo Giaccotto
University of Connecticut - Department of Finance ( email )
School of Business
2100 Hillside Road
Storrs, CT 06269
United States
202-486-4360 (Phone)
202-486-0349 (Fax)
Thomas J. O'Brien (Contact Author)
University of Connecticut - Department of Finance ( email )
School of Business
2100 Hillside Road
Storrs, CT 06269
United States
860-486-3040 (Phone)
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