The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APT-modelling
We estimate the impact of dollar changes on the value of German DAX corporations, using APT-modelling for the period 1977 - 1995. Several macroeconomic risk factors, including the dollar and a residual market factor representing the general market risk, are specified. The general notion is that the export-oriented German companies should benefit from increasing dollar values. We find time-varying dollar exposure presumably depending on the prevailing trade regime. Dollar sensitivity is positive as expected in periods with a positive trade balance, whereas it turns negative in periods with a negative trade balance (e.g., in the first half of the 1980s). APT-modelling simultaneously considers exchange rate exposure and risk-premia of macroeconomic risk factors, the latter also being unstable over time.
|Date of creation:||Dec 2003|
|Date of revision:|
|Publication status:||Published in Darmstadt Discussion Papers in Economics . 127 (2003-12)|
|Note:||for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/20146/|
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- Horst Entorf & Gösta Jamin, 2007.
"German Exchange Rate Exposure at DAX and Aggregate Levels, International Trade and the Role of Exchange Rate Adjustment Costs,"
German Economic Review,
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- Entorf, Horst & Jamin, Gösta, 2003. "German Exchange Rate Exposure at DAX and Aggregate Level, International Trade, and the Role of Exchange Rate Adjustment Costs," Darmstadt Discussion Papers in Economics 126, Darmstadt University of Technology, Department of Law and Economics.
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- Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
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"Linear and nonlinear foreign exchange rate exposures of German nonfinancial corporations,"
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- Sohnke M. Bartram, 2002. "Linear and Nonlinear Foreign Exchange Rate Exposures of German Nonfinancial Corporations," Finance 0207001, EconWPA.
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