The time-varying diversifiability of corporate foreign exchange exposure |
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| Affiliation: | 1. Department of Economics and Finance, Tobin College of Business, St. John''s University, Queens, NY 11439, USA;2. Department of Finance, Muma College of Business, University of South Florida, Tampa, FL 33620, USA;1. Adam Smith Business School, University of Glasgow, Gilbert Scott Building, Glasgow G12 8QQ, UK;2. Higher School of Economics, National Research University, 38 Studencheskaya St., Perm, Russia;3. Department of Economics, University of Cyprus, 1678 Nicosia, Cyprus;1. Department of Accounting, Banking and Financial Sciences, College of Business Administration and Economics, Al-Hussein Bin Talal University, PO Box (20), Ma''an 71111, Jordan,;2. School of Business, University of the Sunshine Coast, Maroochydore DC, Queensland 4558, Australia;3. IGSB, University of South Australia, Adelaide, South Australia 5001, Australia;1. Lally School of Management, Rensselaer Polytechnic Institute, Troy, NY 12180, United States;2. Fordham University, Bank of Finland and University of Sydney, New York, NY 10023, United States;3. Muma College of Business, University of South Florida, Tampa, FL 33620, United States;4. The Peter J. Tobin College of Business, St. John''s University, Queens, NY 11439, United States;1. Department of Accounting and Finance, University of Bristol, United Kingdom;2. Department of Economics, University of York, United Kingdom |
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| Abstract: | Estimating comovement measures for a large set of bilateral foreign exchange (FX) rates, I explore the relation between firm-level FX exposure and its time-varying diversifiability. For a sample of U.S. firms, the magnitude of FX exposure appears to increase during periods of low currency risk diversifiability. Additional results suggest that the introduction of the euro exacerbated the effect of diversifiability on developed market currency exposure. Moreover, the low diversifiability of emerging market currencies seems to have a stronger effect on FX exposure than the low diversifiability of developed market currencies. |
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