Exchange rate exposure: A nonparametric approach
Uluc Aysun () and
No 2009-18, Working papers from University of Connecticut, Department of Economics
The typical conclusion reached when researchers examine exchange rate exposure using a linear model is that only a few firms are exposed. This finding is puzzling since institutional knowledge and basic finance theory points to a larger effect. In this paper, we compare results obtained using a linear approach with those from nonlinear, partially parametric and nonparametric models. Our data consist of nonfinancial firms in five emerging market countries and the US. Among firms that were not found to have a linear exposure, we find that a considerable proportion of these are exposed when nonlinear, partially parametric or nonparametric models are used. The increase in exposure is most striking when a nonparametric model is used. We also find evidence that firms' hedging activities decrease linear exposure but do not affect nonparametric exposure.
Keywords: nonparametric; exchange rate exposure; hedging. (search for similar items in EconPapers)
JEL-codes: E44 F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-mac
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Journal Article: Exchange rate exposure: A nonparametric approach (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2009-18
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