Research Discussion Papers, Bank of Finland
No 34/2013:
Assessing the exchange rate exposure of US multinationals
Patrick Crowley ()
and Amir Habibdoust
Abstract: This paper aims to examine the relationship between
exchange rate movements and the stock return of firms at different time
horizons by employing wavelet analysis. In particular, we use the maximum
overlap discrete wavelet transform (MODWT) to decompose the exchange rate
movement and the US firm's stock return over the period January 2006 to
July 2012. The results reveal that at longer horizons not only does the
number of firms which are exposed to exchange rate volatility increase but
also the degree of exchange rate exposure increases. What is more, the
sensitivity to exchange rate volatility is stronger at longer horizons for
importing firms than for exporting firms, which shows an asymmetry in the
usage of hedging strategies between importers and exporters.
Keywords: discrete wavelet analysis; exchange rate volatility; hedging strategy; (follow links to similar papers)
JEL-Codes: C32; F23; F31; (follow links to similar papers)
17 pages, December 18, 2013
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