Abstract
This paper examines how U.S. multinational firms are affected by foreign currency movements. In light of detailed exchange rate data, we find that 29% of our sample of 935 U.S. firms with real operations in foreign countries is significantly affected by currency movements between 1990 and 2001. Results show moreover that U.S. stock returns react asymmetrically to currency movements. By introducing nonlinearity in foreign currency risk exposure, we noticeably increase the precision and the significance of exposure estimates. We demonstrate moreover that asymmetries are more pronounced towards large versus small currency fluctuations than over depreciation and appreciation cycles.
Original language | English |
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Pages (from-to) | 495-518 |
Journal | Journal of Empirical Finance |
Volume | 13 |
Issue number | 4 |
DOIs | |
Publication status | Published - Oct 2006 |
Externally published | Yes |
Bibliographical note
Special Issue: International FinanceKeywords
- Exchange risk
- Asymmetry
- U.S. multinational firms
- Multinational-specific exchange risk factor