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Openness and the Exchange Rate Exposure of National Stock Markets

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  • Friberg, Richard
  • Nydahl, Stefan

Abstract

The relationship between the valuation of the stock market and an effective exchange rate is examined. Monthly data on 11 industrialized countries, for the period 1973-96, are used. It is found that the more open the economy, the stronger is the (positive) relationship between return on the stock market and the exchange rate. The pattern that is found is consistent with the well-documented findings of less than full pass-through of exchange rates into import prices. Copyright @ 1999 by John Wiley & Sons, Ltd. All rights reserved.

Suggested Citation

  • Friberg, Richard & Nydahl, Stefan, 1999. "Openness and the Exchange Rate Exposure of National Stock Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 55-62, January.
    • Handle: RePEc:ijf:ijfiec:v:4:y:1999:i:1:p:55-62
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    Cited by:

    1. Marko Korhonen, 2015. "The Relation between National Stock Prices and Effective Exchange Rates: Does It Affect Exchange Rate Exposure?," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 15(2), pages 241-256, July.
    2. Katalin Bodnár, 2009. "Exchange rate exposure of Hungarian enterprises – results of a survey," MNB Occasional Papers 2009/80, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Claudio Soto & Jorge Selaive, 2003. "Openness and Imperfect Pass-Through: Implications for the Monetary Policy," Working Papers Central Bank of Chile 216, Central Bank of Chile.
    4. Asgharian, Hossein & Hess, Wolfgang & Liu, Lu, 2013. "A spatial analysis of international stock market linkages," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4738-4754.
    5. Harald Hau & Hélène Rey, 2006. "Exchange Rates, Equity Prices, and Capital Flows," The Review of Financial Studies, Society for Financial Studies, vol. 19(1), pages 273-317.
    6. 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.
    7. Hutson, Elaine & O'Driscoll, Anthony, 2010. "Firm-level exchange rate exposure in the Eurozone," International Business Review, Elsevier, vol. 19(5), pages 468-478, October.
    8. Christian Pierdzioch & Renatas Kizys, 2010. "Sources of time-varying exchange rate exposure," International Economics and Economic Policy, Springer, vol. 7(4), pages 371-390, December.
    9. Mikael C. Bergbrant & Kaysia Campbell & Delroy M. Hunter, 2014. "Firm-Level Competition and Exchange Rate Exposure: Evidence from a Global Survey of Firms," Financial Management, Financial Management Association International, vol. 43(4), pages 885-916, December.
    10. Jing Nie & Zhichao Zhang & Zhuang Zhang & Si Zhou, 2015. "Currency Exposure in China under the New Exchange Rate Regime: National Level Evidence," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(3), pages 97-109, May.
    11. Robert W. Rutledge & Khondkar E. Karim & Chensheng Li, 2014. "A Study of the Relationship between Renminbi Exchange Rates and Chinese Stock Prices," International Economic Journal, Taylor & Francis Journals, vol. 28(3), pages 381-403, September.
    12. Elaine Hutson & Anthony O'Driscoll, 2010. "Firm-level exchange exposure in the Eurozone," Working Papers 200841, Geary Institute, University College Dublin.
    13. Mark J. Holmes & Maghrebi Nabil, 2002. "Non-Linearities, Regime Switching and the Relationship Between Asian Equity and Foreign Exchange Markets," International Economic Journal, Taylor & Francis Journals, vol. 16(4), pages 121-139.
    14. 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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