Foreign Exchange Exposure of U.S. Firms in the Pacific Rim
42 Pages Posted: 3 Jul 2005
Date Written: June 23, 2005
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: Suggested Citation