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Firm Valuation, Earnings Expectations, and the Exchange-Rate Exposure Effect

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Author Info
Bartov, Eli
Bodnar, Gordon M
Abstract

Consistent with previous research, the authors fail to find a significant correlation between the abnormal returns of their sample firms with international activities and changes in the dollar. They investigate the possibility that this failure is due to mispricing. Lagged changes in the dollar are a significant variable in explaining current abnormal returns of the authors' sample firms, suggesting that misprizing does occur. A simple trading strategy based upon these results generates significant abnormal returns. Corroborating evidence from returns around earnings announcements as well as errors in analysts' forecasts of earnings is also provided. Copyright 1994 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 49 (1994)
Issue (Month): 5 (December)
Pages: 1755-85
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Handle: RePEc:bla:jfinan:v:49:y:1994:i:5:p:1755-85

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  1. Uluc Aysun & Melanie Guldi, 2008. "Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure," Working papers 2008-06, University of Connecticut, Department of Economics, revised Oct 2008. [Downloadable!]
  2. Takashi Obinata, 2002. "Concept and Relevance of Income," CIRJE F-Series CIRJE-F-171, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  3. Reid W. Click & Paul Harrison, 2000. "Does multinationality matter? Evidence of value destruction in U.S. multinational corporations," Finance and Economics Discussion Series 2000-21, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  4. Júnior, José L. R., 2008. "Exchange Rate Exposure, Foreign Currency Debt and the Use of Derivatives: Evidence from Brazil," Ibmec Working Papers wpe_139, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
  5. Bartram, Sohnke & Bodnar, Gordon, 2005. "The Exchange Rate Exposure Puzzle," MPRA Paper 6482, University Library of Munich, Germany. [Downloadable!]
  6. Johansson, Anders & Rolseth, Lars, 1999. "The effects of firm-specific variables and consensus forecasts data on the pricing of large Swedish firms’ stocks," Working Papers in Economics 15, Göteborg University, Department of Economics. [Downloadable!]
  7. Bartram, Sohnke M. & Karolyi, G. Andrew, 2004. "The Impact of the Introduction of the Euro on Foreign Exchange Rate Risk Exposures," Working Paper Series 2005-3, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
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  8. Sandra L. Chamberlain & John S. Howe & Helen Popper, 1996. "The Exchange Rate Exposure of U.S. and Japanese Banking Institutions," Center for Financial Institutions Working Papers 96-55, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  9. Robert Dekle & Heajin Ryoo, 2002. "Exchange Rate Fluctuations, Financing Constraints, Hedging, and Exports: Evidence from Firm Level Data," CEI Working Paper Series 2003-13, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
    Other versions:
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