The pricing of foreign exchange risk around the Asian financial crisis: evidence from Taiwan's stock market |
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| Institution: | 1. International Livestock Research Institute (ILRI), PO Box 30709, Nairobi 00100, Kenya;2. Animal Production Systems Group, Wageningen University, P.O. Box 430, 6700, AK, Wageningen, The Netherlands;3. International Centre for Research on Agroforestry (ICRAF), Nairobi, Kenya;4. School of the Environment, Natural Resources and Geography, Bangor University, UK;5. Selian Agricultural Research Institute (SARI), P.O. Box 6024, Arusha, Tanzania;6. Centre for Agriculture and Biosciences International (CABI), 9, Muthaiga - Limuru Road, PO Box 633-00621, Nairobi, Kenya;7. Commonwealth Scientific and Industrial Research Organisation, 306 Carmody Road, St Lucia, 4067, QLD, Australia |
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| Abstract: | The volatile exchange rate movement during the Asian financial crisis has led global investors to re-evaluate the importance of currency exposures in Asian stock markets. In this paper, we examine industry-level currency risk of Taiwan's stock market around the Asian financial crisis. The results show that most export-oriented industries, except for the electronics industry, are positively affected by the depreciation of the New Taiwan Dollars (NTD) against the US Dollars (USD). We also find that the magnitude of currency risk is less for banking and electronics industries in the Taiwan Stock Exchange (TSE) than for those in the over-the-counter (OTC) security exchange. Our results are consistent with the findings of Chow et al. (J. Financial Res. 2 (1997b) 191) and have important implications for international investors with exposures in Taiwan's stock market. |
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