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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.

Suggested Citation

  • Muller, Aline & Verschoor, Willem F.C., 2009. "The effect of exchange rate variability on US shareholder wealth," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 1963-1972, November.
  • Handle: RePEc:eee:jbfina:v:33:y:2009:i:11:p:1963-1972
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    References listed on IDEAS

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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. Bredin, Don & Hyde, Stuart, 2011. "Investigating sources of unanticipated exposure in industry stock returns," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1128-1142, May.
    4. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    5. Hong-Ghi Min & Judith A. McDonald & Sang-Ook Shin, 2016. "What Makes a Safe Haven? Equity and Currency Returns for Six OECD Countries during the Financial Crisis," Annals of Economics and Finance, Society for AEF, vol. 17(2), pages 365-402, November.
    6. Streit, Daniel, 2016. "Firm-level effects of asymmetric intervention in foreign exchange markets: Evidence from the Swiss currency floor," Journal of International Money and Finance, Elsevier, vol. 60(C), pages 289-312.
    7. Akay, Gokhan H. & Cifter, Atilla, 2014. "Exchange rate exposure at the firm and industry levels: Evidence from Turkey," Economic Modelling, Elsevier, vol. 43(C), pages 426-434.
    8. Du, Ding & Hu, Ou, 2014. "The long-run component of foreign exchange volatility and stock returns," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 31(C), pages 268-284.
    9. Muller, Aline & Verschoor, Willem F.C., 2006. "Foreign exchange risk exposure: Survey and suggestions," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 385-410, October.

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