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Exchange rate exposure: A nonparametric approach

  • Aysun, Uluc
  • Guldi, Melanie

The typical conclusion reached when researchers examine exchange rate exposure is that only a few firms are exposed. This finding is puzzling since institutional knowledge and theory suggests a larger effect. In this paper, we compare results obtained using a linear approach with those from nonlinear and nonparametric models. Among firms that don't have a linear exposure, we find that a considerable proportion of these are exposed when nonlinear or nonparametric models are used. This exposure is most striking when a nonparametric model is used. We also find that firms' hedging activities decrease linear exposure but don't affect nonparametric exposure.

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Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 12 (2011)
Issue (Month): 4 ()
Pages: 321-337

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Handle: RePEc:eee:ememar:v:12:y:2011:i:4:p:321-337
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