A comparison of FX exposure estimates with different control variables

Alain Krapl and Thomas J. O'Brien

Applied Financial Economics, 2014, vol. 24, issue 6, 437-451

Abstract: We compare the foreign exchange (FX) exposure estimates of four empirical models that differ only in the choice of control variable. We use a large sample of US equities (19 100) over a long time span (1980--2011). We find a much higher percentage of statistically significant FX exposure estimates with a bond return control variable than with a broad equity index. We also find that the FX exposure estimates with no control variable are close to those for the bond return control variable, and the estimates with Fama--French factor control variables are close to those with the equity index.

Date: 2014
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DOI: 10.1080/09603107.2014.884698

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