Time-Varying Exchange Rate Exposure: Evidence from Country-Level Stock Returns - Softcover

Jayasinghe, Prabhath

Softcover

ISBN 10: 3846556408 ISBN 13: 9783846556405

Publisher: LAP LAMBERT Academic Publishing, 2011

Synopsis

This study inquires into the time-varying behaviour of exchange rate exposure. Time-varying exchange rate exposure coefficients (betas) are viewed within the framework of a conditional International Capital Asset Pricing Model (ICAPM). Using the time-varying second moments of the relevant variables obtained from a trivatriate GARCH-M model, exchange rate exposure coefficients have been derived with explicit focus on the non-orthogonality between exchange rate changes and market returns. The exposure coefficients associated with bilateral exchange rates between the US dollar and currencies in eight countries are investigated. The analysis of the stochastic structure underlying the time-varying exposure coefficients reveal that they are mean-reverting and could follow a long-memory process. The presence of mean-reverting exchange rate exposure coefficients has important implications for investment and hedging strategies. Time-varying exposure betas are also used in two applications, results of which reveal that they could be a useful source of information in investment and hedging strategies.

About this title

About the Author

Dr. Prabhath Jayasinghe is a Senior Lecturer at the Department of Business Economics in the Faculty of Management & Finance, University of Colombo. He earned his PhD from National University of Singapore and MPhil from University of Sydney. His research areas include financial markets, international finance and political economy of development.

Edition details

• Publisher: LAP LAMBERT Academic Publishing
• Publication date: 2011
• Language: English
• ISBN 10: 3846556408
• ISBN 13: 9783846556405
• Binding: Paperback
• Number of pages: 92