Exchange Risk Premia and Firm Characteristics

46 Pages Posted: 9 May 2015

See all articles by Hyunchul Chung

Hyunchul Chung

Hanyang University-School of Business

Basma Majerbi

Gustavson School of Business, University of Victoria

Sorin Rizeanu

University of Victoria

Date Written: December 15, 2014

Abstract

This paper examines the presence and the determinants of exchange risk premia in stock returns using firm level data from South Korea. We conduct empirical asset pricing tests based on cross-sectional data sorted by firm characteristics such as firm size, liquidity, foreign ownership, and industry. Using alternative model specifications and exchange rate measures, our results support the hypothesis of a significant unconditional exchange risk premium in the Korean stock market at firm and industry levels. More specifically, we find that the exchange risk premium is directly related to firm liquidity and inversely related to firm size and foreign ownership.

Keywords: Exchange Rates; Exchange Risk Pricing; International Asset Pricing; Emerging Markets; Foreign Portfolio Investment; Risk Premium and Firm Characteristics

JEL Classification: F21; F31; G12, G15

Suggested Citation

Chung, Hyunchul and Majerbi, Basma and Rizeanu, Sorin, Exchange Risk Premia and Firm Characteristics (December 15, 2014). Emerging Markets Review, Vol. 22, 2015, 96-125, Available at SSRN: https://ssrn.com/abstract=2603854

Hyunchul Chung

Hanyang University-School of Business ( email )

222, Wangsimni-ro
Seongdong-gu
Seoul
Korea

Basma Majerbi (Contact Author)

Gustavson School of Business, University of Victoria ( email )

Victoria, British Columbia
Canada
250-472-4281 (Phone)

Sorin Rizeanu

University of Victoria ( email )

3800 Finnerty Rd
Victoria, British Columbia V8P 5C2
Canada

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