The Effects of Exchange Rate Movements on Publicly Traded US Corporations

Abstract

Previous literature struggled to find strong effects of exchange-rate exposure on US stock returns. Our paper brings firm-specific export data to reinvestigate this exchange-rate puzzle and finds surprisingly large exchange-rate effects on exports, sales, profits, and stock returns. These were not offset by (financial or operational) hedging, and they seem to have not only been due to export changes but also due to changes in the domestic competitive environment. The effects increased over time and were stronger for larger and more export-oriented firms.

Keywords: Exchange Rates, Exports, and Financial Market Reactions

JEL Classification: F14, F23, F36