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

See all articles by Hang (Robin) Luo

Hang (Robin) Luo

Xihua University

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Puspakaran Kesayan

Universiti Utara Malaysia (UUM)

Date Written: March 6, 2006

Abstract

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

Luo, Hang (Robin) and Visaltanachoti, Nuttawat and Kesayan, Puspakaran, Analysis of Foreign Currency Exposure of the New Zealand Stock Market (March 6, 2006). Investment Management and Financial Innovations, 2006, Volume 3, Issue 1, 132-141., Available at SSRN: https://ssrn.com/abstract=2205607

Hang (Robin) Luo (Contact Author)

Xihua University

School of Economics
Xihua University
Chengdu, SIchuan 610039
China

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

Puspakaran Kesayan

Universiti Utara Malaysia (UUM) ( email )

Finance Dept, School of Econ., Finance & Banking
East Wing, COB Main Bldg,Universiti Utara Malaysia
Sintok 06010 Kedah, 06010
Malaysia
+604-9286966 (Phone)
+604-928 (Fax)

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