How Do Stock Returns Respond to a Currency Devaluation Announcement?

Wael Ahmed Elgharib, Mahmoud Elmarzouky () and Doaa Shohaieb
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Wael Ahmed Elgharib: The Egyptian Institute of Alexandria Academy for Management and Accounting, Alexandria 21923, Egypt
Mahmoud Elmarzouky: St Andrews Business School, University of St. Andrews, St. Andrews KY16 9RJ, UK
Doaa Shohaieb: Aston Business School, Aston University, Birmingham B4 7ET, UK

JRFM, 2025, vol. 18, issue 12, 1-17

Abstract: This study investigates how the Egyptian stock market responded to the 2024 devaluation of the Egyptian Pound (EGP) and evaluates whether price adjustments reflect semi-strong form market efficiency. Using daily data for EGX30 firms, we estimate abnormal returns around the devaluation announcement and document largely insignificant market-wide reactions, indicating weak evidence of semi-strong efficiency. However, notable cross-firm heterogeneity emerges export-oriented and foreign-revenue-generating firms showed greater resilience, while companies dependent on imported inputs experienced sharper declines. These findings highlight how differences in currency exposure shape firms’ sensitivity to exchange rate shocks in emerging markets with recent dual-rate dynamics. From a practical perspective, the results emphasise the importance of transparent policy communication during major currency adjustments and underline the need for investors to account for firms’ FX risk profiles when constructing portfolios in devaluation-prone environments. The findings also offer insights for regulators seeking to strengthen disclosure practices and improve informational efficiency in the Egyptian capital market.

Keywords: currency devaluation; event study; market efficiency; EGX30; Egypt; exchange rate risk (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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