The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APT-modelling
AbstractWe estimate the impact of dollar changes on the value of German DAX corporations, using APT-modelling for the period 1977 - 1995. Several macroeconomic risk factors, including the dollar and a residual market factor representing the general market risk, are specified. The general notion is that the export-oriented German companies should benefit from increasing dollar values. We find time-varying dollar exposure presumably depending on the prevailing trade regime. Dollar sensitivity is positive as expected in periods with a positive trade balance, whereas it turns negative in periods with a negative trade balance (e.g., in the first half of the 1980s). APT-modelling simultaneously considers exchange rate exposure and risk-premia of macroeconomic risk factors, the latter also being unstable over time.
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Bibliographic InfoPaper provided by Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) in its series Darmstadt Discussion Papers in Economics with number 20146.
Date of creation: Dec 2003
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Publication status: Published in Darmstadt Discussion Papers in Economics . 127 (2003-12)
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Other versions of this item:
- Horst Entorf & Gösta Jamin, 2005. "The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APTmodelling," The IUP Journal of Applied Economics, IUP Publications, vol. 0(6), pages 19-33, November.
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- Bartram, Sohnke M., 2004.
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