Exchange Rate Fluctuations, Political Risk, and Stock Returns: Some Evidence from an Emerging Market

Posted: 10 Oct 1994

See all articles by Warren Bailey

Warren Bailey

Cornell University; Fudan University - Fanhai International School of Finance and China Institute of Economics and Finance

Y. Peter Chung

University of California at Riverside

Multiple version iconThere are 2 versions of this paper

Date Written: April 1994

Abstract

We study the impact of exchange rate fluctuations and political risk on the risk premiums reflected in cross- sections of individual equity returns from Mexico, a country which has experienced significant monetary and political turbulence. Indicators from Mexico's currency and sovereign debt markets are employed as proxies for exchange rate and political risks. We find some evidence of unconditional and conditional equity premiums for exposure to these risks. The results highlight common factors in emerging market equity, currency, and sovereign debt markets, and have several implications for corporate and portfolio management.

JEL Classification: G12, G15, F31

Suggested Citation

Bailey, Warren B. and Chung, Y. Peter, Exchange Rate Fluctuations, Political Risk, and Stock Returns: Some Evidence from an Emerging Market (April 1994 ). Available at SSRN: https://ssrn.com/abstract=5578

Warren B. Bailey (Contact Author)

Cornell University ( email )

S. C. Johnson Graduate School of Management
387 Sage Hall
Ithaca, NY 14853-6201
United States
607-255-4627 (Phone)
607-254-4590 (Fax)

HOME PAGE: http://courses.cit.cornell.edu/wbb1/

Fudan University - Fanhai International School of Finance and China Institute of Economics and Finance ( email )

China

Y. Peter Chung

University of California at Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States
909-787-3906 (Phone)
909-787-2933 (Fax)

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