Exchange Rate Exposure of Sectoral Returns and Volatilities: Further Evidence From Japanese Industrial Sectors

Prabhath Jayasinghe, Albert Tsui and Zhaoyong Zhang

Pacific Economic Review, 2014, vol. 19, issue 2, 216-236

Abstract: In this paper we argue that the commonly employed exposure coefficient/beta is inadequate for capturing the entire impact of exchange rate changes on firms' future operating cash flows. Instead, we employ the bivariate Glosten–Jagannathan–Runkle generalized autoregressive conditional heteroskedasticity mean model to investigate four aspects of exchange rate exposure, including sensitivity of stock returns to exchange rate changes, sensitivity of stock returns to the volatility of exchange rate changes, sensitivity of conditional variance of returns to exchange rate volatility, and the dynamic conditional correlation between returns and exchange rate changes, respectively, using data from 10 industrial sectors in Japan. We find significant evidence of such exchange rate exposure which is not captured by the conventional measure. The diagnostic statistics confirm the adequacy of our model, and, hence, the robustness of the results.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1111/1468-0106.12061 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:pacecr:v:19:y:2014:i:2:p:216-236

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1361-374X

Access Statistics for this article

Pacific Economic Review is currently edited by Kenneth S. Chan and Yin-wong Cheung

More articles in Pacific Economic Review from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().