Does the traditional exchange rate fully explain firms’ exposure? |
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Authors: | Heeho Kim |
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Institution: | School of Economics, Kyungpook National University, Daegu, South Korea |
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Abstract: | This study aims to explore the role of the cross exchange rate as a form of market competition, which has previously been omitted as an explanatory variable in estimating the risk exposure of the standard exchange. To the end, we develop a model of exporting firms that reflects exposure to market interaction and mark-up in a duopolistic export market. Using monthly data of stock returns and cross exchange rates of two oligopoly industries (i.e. semiconductor and steel & iron), our empirical evidence supports our hypothesis that cross exchange rates significantly explain firm value. |
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Keywords: | Cross exchange rates exposure market interaction residual demand |
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