The time-varying diversifiability of corporate foreign exchange exposure

Alain A. Krapl

Journal of Corporate Finance, 2020, vol. 65, issue C

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.

Keywords: Foreign exchange (FX) exposure; FX exposure puzzle; Time-varying FX exposure; Diversifiability of FX exposure (search for similar items in EconPapers)
JEL-codes: F39 G15 G32 G39 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s0929119918300038

DOI: 10.1016/j.jcorpfin.2019.101506

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