Exchange risk premia and firm characteristics |
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| Institution: | 1. School of Business, Hanyang University, Republic of Korea;2. Gustavson School of Business, University of Victoria, Canada;1. Adam Smith Business School, University of Glasgow, United Kingdom;2. Durham University Business School, Durham University, United Kingdom;1. Department of Economics, Fordham University, 441 East Fordham Road, Dealy Hall, Office E543, Bronx, NY 10458, United States;2. Department of Economics and the Center for International Policy Studies (CIPS), Fordham University, 441 East Fordham Road, Dealy Hall, Office E513, Bronx, NY 10458, United States |
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| Abstract: | This paper examines the presence and the determinants of exchange risk premia in stock returns using firm level data from South Korea. We conduct empirical asset pricing tests based on cross-sectional data sorted by firm characteristics such as firm size, liquidity, foreign ownership, and industry. Using alternative model specifications and exchange rate measures, our results support the hypothesis of a significant unconditional exchange risk premium in the Korean stock market at firm and industry levels. More specifically, we find that the exchange risk premium is directly related to firm liquidity and inversely related to firm size and foreign ownership. |
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