Asymmetric Exchange Rate Exposure of Stock Returns: Empirical Evidence from Chinese Industries

Juan Cuestas and Bo Tang

No 2015021, Working Papers from The University of Sheffield, Department of Economics

Abstract: This study explores the asymmetric exchange rate exposure of stock returns building upon the capital asset pricing model (CAPM) framework, using monthly returns of Chinese industry indices. In accordance with the existing literature, industry returns are subject to lagged exposure effects, but the asymmetries vary across industries, which could be due to the discrepancies of trade balance and ownership of certain industries. Furthermore, the dynamic multipliers depict that industry returns quickly respond to changes in the exchange rate and correct the disequilibrium within a short time, making the long run exposure to be symmetric or very small. The remaining shocks are mainly explained by the return of market portfolios. This implies that the ongoing restrictions on the RMB daily trading band do indeed protect the Chinese stock market against the effects of currency movements.

Keywords: Asymmetric exchange rate exposure; stock returns; Chinese industries; NARDL (search for similar items in EconPapers)
JEL-codes: C58 F3 G15 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-09
New Economics Papers: this item is included in nep-tra
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Citations: View citations in EconPapers (13)

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http://www.sheffield.ac.uk/economics/research/serps/articles/2015_021 First version, September 2015 (application/pdf)

Related works:
Journal Article: Asymmetric exchange rate exposure of stock returns: empirical evidence from Chinese industries (2017)
Working Paper: Asymmetric Exchange Rate Exposure of Stock Returns: Empirical Evidence from Chinese Industries (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2015021

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