Asymmetric Exchange Rate Exposure of Stock Returns: Empirical Evidence from Chinese Industries
This study explores the asymmetric exchange rate exposure of stock returns building upon the capital asset pricing model (CAPM) framework, using monthly returns of Chinese industry indices. In accordance with the existing literature, industry returns are subject to lagged exposure effects, but the asymmetries vary across industries, which could be due to the discrepancies of trade balance and ownership of certain industries. Furthermore, the dynamic multipliers depict that industry returns quickly respond to changes in the exchange rate and correct the disequilibrium within a short time, making the long run exposure to be symmetric or very small. The remaining shocks are mainly explained by the return of market portfolios. This implies that the ongoing restrictions on the RMB daily trading band do indeed protect the Chinese stock market against the effects of currency movements.
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- Bo Tang, 2015.
"Exchange Rate Exposure of Chinese Firms at the Industry and Firm Level,"
Review of Development Economics,
Wiley Blackwell, vol. 19(3), pages 592-607, 08.
- Tang, Bo, 2014. "Exchange Rate Exposure of Chinese Firms at the Industry and Firm level," MPRA Paper 66008, University Library of Munich, Germany, revised Apr 2015.
- Walid, Chkili & Chaker, Aloui & Masood, Omar & Fry, John, 2011. "Stock market volatility and exchange rates in emerging countries: A Markov-state switching approach," Emerging Markets Review, Elsevier, vol. 12(3), pages 272-292, September. Full references (including those not matched with items on IDEAS)