The effect of exchange rate variability on US shareholder wealth |
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Authors: | Aline Muller Willem FC Verschoor |
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Institution: | 1. HEC Management School of the University of Liège, Belgium and Maastricht University, The Netherlands;2. Erasmus School of Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands |
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Abstract: | We examine the relationship between financial crisis exchange rate variability and equity return volatility for US multinationals. Empirical analysis of the major financial crises of the last decades reveals that stock return variability increases significantly in the aftermath of a crisis, even relative to the increase in stock return volatility for other firms belonging to the same industry and market capitalization class. In conjunction with this increase in total volatility, there is also an increase in stock market risk (β) for multinational firms. Moreover, trade and service oriented industries appear to be particularly sensitive to these changing exchange rate conditions. |
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Keywords: | F3 G12 |
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