Unconditional and conditional exchange rate exposure |
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| Institution: | 1. College of Technology Management, National Tsing Hua University, No. 101, Section 2, Kuang-Fu Road, Hsinchu 300044, Taiwan;2. John M. Olin School of Business, Washington University in St. Louis, USA;3. HKU Business School, University of Hong Kong, Hong Kong Special Administrative Region;4. School of Economics and Academy of Financial Research, Zhejiang University, Hangzhou 310058, China;1. Department of Economics and Finance, Tobin College of Business, St. John''s University, Queens, NY 11439, USA;2. Department of Finance, Muma College of Business, University of South Florida, Tampa, FL 33620, USA |
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| Abstract: | We re-examine the relationship between exchange rate movements and firm value. We estimate the exchange rate exposure of U.S. firms to two currency indices. Firms are clustered into eleven industries. The sample includes exporters and non-exporters. Using a panel approach, we uncover statistically significant and sizable unconditional exposure. We also examine the dynamics of exchange rate exposure modeled as a function of business cycle indicators and firm characteristics. We find that exposure varies over time with macroeconomic and financial variables and increases during economic contractions. Deviations from the unconditional measure of exposure driven by the macroeconomic variables are economically meaningful. |
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