The Time-Varying Diversifiability of Corporate Foreign Exchange Exposure

43 Pages Posted: 27 Dec 2017 Last revised: 30 Jul 2019

See all articles by Alain A. Krapl

Alain A. Krapl

Northern Kentucky University - Department of Economics and Finance

Date Written: July 26, 2019

Abstract

Estimating co-movement measures for a large set of bilateral foreign exchange (FX) rates, I explore the relation between firm-level FX exposure and its time-varying diversifiability. For a sample of U.S. firms, the magnitude of FX exposure appears to increase during periods of low currency risk diversifiability. Additional results suggest that the introduction of the euro exacerbated the effect of diversifiability on developed market currency exposure. Moreover, the low diversifiability of emerging market currencies seems to have a stronger effect on FX exposure than the low diversifiability of developed market currencies.

Keywords: Foreign Exchange (FX) Exposure, FX Exposure Puzzle, Time-Varying FX Exposure, Diversifiability of FX Exposure

JEL Classification: G32, G39, G15, F39

Suggested Citation

Krapl, Alain A., The Time-Varying Diversifiability of Corporate Foreign Exchange Exposure (July 26, 2019). Available at SSRN: https://ssrn.com/abstract=3091718 or http://dx.doi.org/10.2139/ssrn.3091718

Alain A. Krapl (Contact Author)

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

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

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