Exchange rate exposure: A nonparametric approach |
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Authors: | Uluc Aysun Melanie Guldi |
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Affiliation: | aUniversity of Connecticut, Storrs, CT 06269, USA;bMount Holyoke College, South Hadley, MA 01075, USA |
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Abstract: | The typical conclusion reached when researchers examine exchange rate exposure is that only a few firms are exposed. This finding is puzzling since institutional knowledge and theory suggests a larger effect. In this paper, we compare results obtained using a linear approach with those from nonlinear and nonparametric models. Among firms that don't have a linear exposure, we find that a considerable proportion of these are exposed when nonlinear or nonparametric models are used. This exposure is most striking when a nonparametric model is used. We also find that firms' hedging activities decrease linear exposure but don't affect nonparametric exposure. |
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Keywords: | JEL classification: E44 F31 F41 |
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