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Currency risk exposure and the presidential effect in stock returns

Author

Listed:
  • Samar Ashour

    (University of Alabama at Birmingham
    Tanta University)

  • David Rakowski

    (University of Texas at Arlington)

  • Salil K. Sarkar

    (University of Texas at Arlington)

Abstract

We explore how the US presidential effect in stock returns is connected to the US presidential effect in foreign exchange returns to the US dollar. Our results for the 1973–2016 period show that the existence of a presidential effect in stock returns depends on how a firm’s stock returns are associated with changes in the value of the US dollar. We document that a complex association exists between presidential effects in stock returns, stock risk premiums, macro-economic variables, and the foreign exchange market. Overall, the presidential effect in stock returns is driven by exporters through their exposure to the presidential effect in returns to the US dollar.

Suggested Citation

  • Samar Ashour & David Rakowski & Salil K. Sarkar, 2021. "Currency risk exposure and the presidential effect in stock returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(3), pages 469-485, July.
    • Handle: RePEc:spr:jecfin:v:45:y:2021:i:3:d:10.1007_s12197-020-09528-2
    DOI: 10.1007/s12197-020-09528-2
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    References listed on IDEAS

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