Exchange Rate Regimes and Exchange Rate Exposures

Norwegian School of Management Working Paper

26 Pages Posted: 12 May 2001

See all articles by Richard Priestley

Richard Priestley

Norwegian Business School

Bernt Arne Ødegaard

University of Stavanger

Date Written: April 2001

Abstract

We analyze the currency exposure of industries, using data for Norway. The Norwegian case is particularly well suited for investigating currency exposure issues, since it is a very open economy, has dollar denominated exports and ECU denominated imports, and has had three official exchange rate policy regimes over the sample period. At first glance, we find very little evidence of exchange rate exposure. This result is consistent with typical US studies. However, we proceed to show that the statistical and economic signifiance as well as the estimated sign of exposure coefficients are very sensitive to first, whether or not the exchange rate is orthogonalized with respect to the market portfolio, second, exchange rate regimes, and this, whether a currency basket or individual currencies are used. Taking account of these three issues we find strong support for stock returns having exposure to exchange rates.

JEL Classification: F3, F36, G12, G18

Suggested Citation

Priestley, Richard and Ødegaard, Bernt Arne, Exchange Rate Regimes and Exchange Rate Exposures (April 2001). Norwegian School of Management Working Paper, Available at SSRN: https://ssrn.com/abstract=267691 or http://dx.doi.org/10.2139/ssrn.267691

Richard Priestley (Contact Author)

Norwegian Business School ( email )

Nydalsveien
37
N-0442 Oslo, 0283
Norway
47 46410515 (Phone)

Bernt Arne Ødegaard

University of Stavanger ( email )

UiS Business School
Stavanger, NO-4036
Norway

HOME PAGE: http://www6.uis.no/ansatt/odegaard

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