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Does the currency exposure affect stock returns of Chinese automobile firms?

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  • Bo Tang

    (Weichai Power Co., Ltd
    University of Sheffield)

Abstract

This study examines the symmetric and asymmetric exchange rate exposures of Chinese automobile firms at different time horizons. Empirical findings reveal that firm returns are less likely to be affected by currency movements at short-term (daily) horizons due to restrictions on the currency daily trading band, but (a)symmetric exchange rate exposures appear to be significant at relatively longer horizons after the launch of RMB internationalisation, particularly for monthly horizons. Possible hedging strategies could be the application of forward exchange agreements, price difference between onshore and offshore RMB exchange rate, foreign reserves and other quantitative methods. Since returns of foreign capital shares tend to rise with the application of RMB, firms may also consider listing shares on foreign stock exchange in addition to the domestic market and produce products simultaneously in foreign nations through international expansion.

Suggested Citation

  • Bo Tang, 2019. "Does the currency exposure affect stock returns of Chinese automobile firms?," Empirical Economics, Springer, vol. 57(1), pages 53-77, July.
    • Handle: RePEc:spr:empeco:v:57:y:2019:i:1:d:10.1007_s00181-018-1437-4
    DOI: 10.1007/s00181-018-1437-4
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    Cited by:

    1. Andrew Phiri, 2020. "Structural changes in exchange rate-stock returns dynamics in South Africa: examining the role of crisis and new trading platform," Economic Change and Restructuring, Springer, vol. 53(1), pages 171-193, February.

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    More about this item

    Keywords

    Exchange rate exposure; RMB internationalisation; Chinese automobile firms;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F3 - International Economics - - International Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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