Asymmetric Currency Exposure of US Bank Stock Returns

Journal of Multinational Financial Management, Volume 15, Issues 4–5, Pages 455-472, 2005

Posted: 28 Feb 2021

See all articles by Chu-Sheng Tai

Chu-Sheng Tai

Texas Southern University - Department of Accounting and Finance

Date Written: January 2, 2005

Abstract

Most of previous studies have not been successful in finding significant currency exposure. One possible explanation for this failure is that these studies ignore the asymmetric relationship between the value of a firm and exchange rate. Consequently, in this paper, I explore the possibility of asymmetric currency exposure using US bank stocks. The empirical results show that more than 80% of the sample are significantly exposed to exchange rate changes in a asymmetric way based on the tests of multi-factor model with multivariate GARCH parameterization. This empirical finding is robust to whether contemporaneous or lagged exchange rates changes are used to estimate the model. The strong evidence of asymmetric currency exposure suggests that both asymmetry and conditional heteroskedasticity play important roles in estimating currency exposure.

Keywords: Asymmetric currency exposure, Bank, Multivariate GARCH

JEL Classification: C32, G12, G21

Suggested Citation

Tai, Chu-Sheng, Asymmetric Currency Exposure of US Bank Stock Returns (January 2, 2005). Journal of Multinational Financial Management, Volume 15, Issues 4–5, Pages 455-472, 2005, Available at SSRN: https://ssrn.com/abstract=3758650

Chu-Sheng Tai (Contact Author)

Texas Southern University - Department of Accounting and Finance ( email )

United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
74
PlumX Metrics