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On The Exchange Rate Risk Contribution To The Performance Of International Investments: The Case Of Romania

Author

Listed:
  • Alexandra HOROBET

    (Academy of Economic Studies Bucharest)

  • Livia ILIE

    (University Lucian Blaga of Sibiu)

Abstract

The paper examines the impact of changes in the Romanian currency exchange rates against the US dollar and the euro on an investment in the Romanian stock market from the perspective of a US dollar and euro based investor. Our analysis is directed towards identifying the significance of exchange rate volatility for the total risk of a Romanian investment from the perspective of investors with the US dollar and euro as reference currencies. Our results indicate that during more turbulent times investors were better off if invested in their home markets. We also find that the exchange rate risk decreased the risk that a US dollar or a euro-based investor was exposed to in Romania. The contribution of exchange rate risk to the risk of an international investor diversified in his home market and the Romanian market is small, even negative, with no significant differences turbulent versus normal times.

Suggested Citation

  • Alexandra HOROBET & Livia ILIE, 2009. "On The Exchange Rate Risk Contribution To The Performance Of International Investments: The Case Of Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 3, pages 57-83, May.
    • Handle: RePEc:aic:revebs:y:2009:i:3:horobeta
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    References listed on IDEAS

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    Cited by:

    1. Mirela NICHITA, 2015. "An Overview On State Of Knowledge Of Risk And Risk Management In Economics Fields," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 7, pages 423-430, April.
    2. Antonio Portugal Duarte & Nuno Baetas da Silva, 2022. "Exchange Rate Synchronization for a Set of Currencies from Different Monetary Areas," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(2), pages 163-189, June.
    3. Mirela NICHITA, 2015. "Regression Model For Risk Reporting In Financial Statements Of Accounting Services Entities," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 8, pages 101-107, June.
    4. Mirela Elena Nichita & Marcel VULPOI, 2016. "Relationship between risk and transparency in the financial statements of professional services entities," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 14(137), pages 540-540, April.
    5. Mirela Nichita & Carmen Turlea, 2015. "Approach Regarding a Framework for Risk Reporting in Order to Enhance the Related Good Practices," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(40), pages 1108-1108, August.

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    More about this item

    Keywords

    Exchange rate; Romania; international investments; volatility;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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