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The Latin American exchange exposure of U.S. multinationals


  • Muller, A.
  • Verschoor, Willem F.C.


This article examines whether there exists any relationship between individual U.S. multinationals' stock returns and fluctuations in Latin American exchange rates. By using a disaggregated dataset of weekly stock returns and real exchange rate movements, it appears that the apparent lack of currency exposure previously documented is mainly due to both the use of too aggregated economic variables and the ignorance of the intervaling effect. We find that about 4% (12%) of the firms experienced economically significant positive (negative) exposure effects for the period of January 1970 to December 2001. While there is time-variation in significant exposure effects, the overall extent of exposure is not sample dependent - a depreciating (appreciating) dollar against Latin American currencies has a net positive (negative) impact on U.S. multinationals. Individual firms in industry groups show high positive as well as negative exposure suggesting that exposure is not necessarily economically significant in the aggregate. The extent to which firms are exposed to Latin American currency fluctuations varies with return horizons; short-term exposure seems to be relatively well hedged, where considerable evidence of long-term exposure is found.

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  • Muller, A. & Verschoor, Willem F.C., 2008. "The Latin American exchange exposure of U.S. multinationals," Journal of Multinational Financial Management, Elsevier, vol. 18(2), pages 112-130, April.
  • Handle: RePEc:eee:mulfin:v:18:y:2008:i:2:p:112-130

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    References listed on IDEAS

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    Cited by:

    1. Huffman, Stephen P. & Makar, Stephen D. & Beyer, Scott B., 2010. "A three-factor model investigation of foreign exchange-rate exposure," Global Finance Journal, Elsevier, vol. 21(1), pages 1-12.
    2. Joseph, Nathan Lael & Lambertides, Neophytos & Savva, Christos S., 2015. "Short-horizon excess returns and exchange rate and interest rate effects," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 37(C), pages 54-76.
    3. repec:eee:touman:v:32:y:2011:i:4:p:934-948 is not listed on IDEAS
    4. Erwin Hansen S. & Stuart Hyde, 2013. "Determinants of corporate exchange rate exposure in Chilean firms," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(3), pages 70-88, December.

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