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The effect of exchange rate variability on US shareholder wealth

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  • Muller, Aline
  • Verschoor, Willem F.C.

Abstract

We examine the relationship between financial crisis exchange rate variability and equity return volatility for US multinationals. Empirical analysis of the major financial crises of the last decades reveals that stock return variability increases significantly in the aftermath of a crisis, even relative to the increase in stock return volatility for other firms belonging to the same industry and market capitalization class. In conjunction with this increase in total volatility, there is also an increase in stock market risk ([beta]) for multinational firms. Moreover, trade and service oriented industries appear to be particularly sensitive to these changing exchange rate conditions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 33 (2009)
Issue (Month): 11 (November)
Pages: 1963-1972

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:11:p:1963-1972

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Multinational firms Financial crisis Exchange rate risk Market risk;

References

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Cited by:
  1. DAVTYAN Azat, 2014. "Gmm Estimation And Shapiro-Francia Normality Test: A Case Study Of Developing Countries," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(1), pages 43-58, April.
  2. Bubák, Vít & Kocenda, Evzen & Zikes, Filip, 2011. "Volatility transmission in emerging European foreign exchange markets," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2829-2841, November.
  3. Don Bredin & Stuart Hyde, 2010. "Investigating Sources of Unanticipated Exposure in Industry Stock Returns," Working Papers 201001, Geary Institute, University College Dublin.

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