Asymmetric Exchange Rate Exposure: Theory and Evidence

Posted: 17 Jul 2003

See all articles by Gregory Koutmos

Gregory Koutmos

Fairfield University - Charles F. Dolan School of Business

Anna D. Martin

Fairfield University - Charles F. Dolan School of Business

Abstract

This paper tests the hypothesis that exchange rate exposure is asymmetric over appreciation-depreciation cycles. More specifically, it investigates whether returns on nine sector indexes across four major countries are asymmetrically affected by exchange rate movements. The results show that in several instances exposure is asymmetric. Asymmetries are found to be more pronounced in the financial and noncyclical sectors. Possible theoretical explanations are provided regarding the particular type of exposure found across sectors and countries.

Keywords: Exchange rate exposure, asymmetric exposure, conditional heteroskedasticity

JEL Classification: F3, G15

Suggested Citation

Koutmos, Gregory and Martin, Anna D., Asymmetric Exchange Rate Exposure: Theory and Evidence. Available at SSRN: https://ssrn.com/abstract=415240

Gregory Koutmos (Contact Author)

Fairfield University - Charles F. Dolan School of Business ( email )

Dolan School of Business
N. Benson Road
Fairfield, CT 06824
United States
203-254-4000 Ext. 2832 (Phone)

Anna D. Martin

Fairfield University - Charles F. Dolan School of Business ( email )

Dolan School of Business
N. Benson Road
Fairfield, CT 06824
United States
203-254-4000 Ext. 2881 (Phone)
203-254-4105 (Fax)

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