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International Competition and Exchange Rate Shocks: A Cross-Country Industry Analysis of Stock Returns

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  • Griffin, John M
  • Stulz, Rene M

Abstract

This article systematically examines the importance of exchange rate movements and industry competition for stock returns. Common shocks to industries across countries are more important than competitive shocks due to changes in exchange rates. Weekly exchange rate shocks explain almost nothing of the relative performance of industries. Using returns measured over longer horizons, the importance of exchange rate shocks increases slightly and the importance of industry common shocks increases more substantially. Both industry and exchange rate shocks are more important for industries that produce internationally traded goods, but the importance of these shocks is economically small for these industries as well. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Griffin, John M & Stulz, Rene M, 2001. "International Competition and Exchange Rate Shocks: A Cross-Country Industry Analysis of Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 215-241.
  • Handle: RePEc:oup:rfinst:v:14:y:2001:i:1:p:215-41
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    References listed on IDEAS

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    1. Roll, Richard, 1992. "Industrial Structure and the Comparative Behavior of International Stock Market Indices," Journal of Finance, American Finance Association, vol. 47(1), pages 3-41, March.
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    4. Griffin, John M. & Andrew Karolyi, G., 1998. "Another look at the role of the industrial structure of markets for international diversification strategies," Journal of Financial Economics, Elsevier, vol. 50(3), pages 351-373, December.
    5. Bodnar, Gordon M. & Gentry, William M., 1993. "Exchange rate exposure and industry characteristics: evidence from Canada, Japan, and the USA," Journal of International Money and Finance, Elsevier, vol. 12(1), pages 29-45, February.
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