Analysis of Foreign Currency Exposure of the New Zealand Stock Market
Investment Management and Financial Innovations, 2006, Volume 3, Issue 1, 132-141.
10 Pages Posted: 23 Jan 2013 Last revised: 12 Jan 2017
Date Written: March 6, 2006
This paper analyses the impact of foreign currency exposure on the value of the New Zealand public listed companies using the New Zealand/US exchange rate and Trade Weighted Index factor return. Augmented market model (Adler and Dumas, 1984; Di Iorio and Faff, 2000; Dominguez and Tesar, 2001) would be employed to study the relationship between exchange rate movements and firm value. Using daily data, we test the following hypotheses in this paper: a) Foreign cu rency exposure is a function of firm’s size and its industry affiliation; b) Foreign currency exposure is a function of financial indicators, such as dividend yield, liquidities and P/E ratio. However, we find very weak and ambiguous evidence for the foreign currency exposure on the value of New Zealand companies.
Keywords: Foreign Currency Exposure, New Zealand
JEL Classification: G14, G15
Suggested Citation: Suggested Citation