Foreign Exchange Exposure of U.S. Firms in the Pacific Rim

42 Pages Posted: 3 Jul 2005

See all articles by Lifan Zhang

Lifan Zhang

Government of New Zealand - Treasury

Timothy Falcon Crack

University of Otago - Department of Accountancy and Finance

Date Written: June 23, 2005

Abstract

This is the first study of the broad exposure of U.S. stock returns to Pacific Rim foreign exchange (FX) risk. Our work provides an independent test of the robustness of findings in other markets. For example, we find an interval effect (i.e., the sensitivity of the relationship between stock returns and FX fluctuations increases with return horizon). This finding lends support to the hypothesis of Chow et al (1997) that weak sensitivity relationships found in much of the prior literature may be because most authors use shorthorizon data. Our other main results are consistent with theory and with prior empirical results in other markets.

Keywords: Foreign exchange risk, FX, R&D, Pacific Rim currencies, US stock returns

JEL Classification: F31, G12, G30

Suggested Citation

Zhang, Lifan and Crack, Timothy Falcon, Foreign Exchange Exposure of U.S. Firms in the Pacific Rim (June 23, 2005). Available at SSRN: https://ssrn.com/abstract=750024 or http://dx.doi.org/10.2139/ssrn.750024

Lifan Zhang

Government of New Zealand - Treasury ( email )

PO Box 3724
Wellington, 6011
New Zealand

Timothy Falcon Crack (Contact Author)

University of Otago - Department of Accountancy and Finance ( email )

Dunedin
New Zealand

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