A Comparison of FX Exposure Estimates with Different Control Variables

22 Pages Posted: 3 May 2011 Last revised: 17 Jun 2014

See all articles by Alain A. Krapl

Alain A. Krapl

Northern Kentucky University - Department of Economics and Finance

Thomas J. O'Brien

University of Connecticut - Department of Finance

Date Written: January 21, 2013

Abstract

We compare the FX exposure estimates of four empirical models that differ only in the choice of control variable. We use a large sample of U.S. equities (19,100) over a long time span (1980-2011). We find a much higher percentage of statistically significant FX exposure estimates with a bond return control variable than with a broad equity index. We also find that the FX exposure estimates with no control variable are close to those for the bond return control variable, and the estimates with Fama-French factor control variables are close to those with the equity index.

Keywords: Foreign exchange, currency, full FX exposure, partial FX exposure, FX cash flow exposure

JEL Classification: F23, G15

Suggested Citation

Krapl, Alain A. and O'Brien, Thomas J., A Comparison of FX Exposure Estimates with Different Control Variables (January 21, 2013). Applied Financial Economics, Vol. 24, No. 6, 2014. Available at SSRN: https://ssrn.com/abstract=1829085 or http://dx.doi.org/10.2139/ssrn.1829085

Alain A. Krapl

Northern Kentucky University - Department of Economics and Finance ( email )

Haile/US Bank College of Business
Nunn Drive
Highland Heights, KY 41099
United States

Thomas J. O'Brien (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States
860-486-3041 (Phone)
860-486-0634 (Fax)

HOME PAGE: http://www.business.uconn.edu/staff.asp?id=57

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