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- Title
Estimating Exchange Rate Exposures.
- Authors
Bodnar, Gordon M.; Wong, M. H. Franco
- Abstract
We show that both return measurement horizon and model specification have noticeable impacts on estimates of exposure from equity prices for US firms. While increases in the return horizon lead to increases in the precision of the estimates, this effect is less significant than the impact of model structure. We demonstrate that the inclusion of a market return variable and its particular construction has a dramatic influence on the sign and size of the exposures due to a strong relation between firm size and exposure for US firms. We propose using CRSP cap-based portfolios as the control for market factors and show that this produces exposures with stronger relation to foreign cash flows and correlations with firm size.
- Subjects
UNITED States; FOREIGN exchange rates; STOCKS (Finance); CORPORATE finance
- Publication
Financial Management (Wiley-Blackwell), 2003, Vol 32, Issue 1, p35
- ISSN
0046-3892
- Publication type
Article
- DOI
10.2307/3666203