scholarly journals The Dollar and the German Stock Market: Determination of Exposure to and Pricing of Exchange Rate Risk Using APT-modelling

2003 ◽  
Author(s):  
Horst Entorf ◽  
Goesta Jamin
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Exchange Rate Risk ◽  
Rate Risk ◽  
German Stock ◽  
German Stock Market

German Exchange Rate Exposure at DAX and Aggregate Levels, International Trade and the Role of Exchange Rate Adjustment Costs

2007 ◽  
Vol 8 (3) ◽  
pp. 344-374 ◽  
Author(s):  
Horst Entorf ◽  
Gösta Jamin
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Adjustment Costs ◽  
Macroeconomic Factors ◽  
Exchange Rate Exposure ◽  
Panel Regressions ◽  
Long Run ◽  
Rate Adjustment ◽  
German Stock ◽  
German Stock Market

Abstract This article analyses value changes of German stock market companies in response to movements of the US dollar. The approach followed in this work extends the standard means of measuring exchange rate exposure in several ways, e.g. by using multifactor modelling instead of augmented Capital Asset Pricing Model, application of moving window panel regressions and orthogonalization of overall market risk vis-à-vis currency risk. A further innovation lies in testing the theoretical implications of exchange rate adjustment costs (hedging costs) for firm values and economic exposure. Based on time series and panel data of German Deutsche Aktien Xchange companies, Deutsche Mark/dollar rates and macroeconomic factors, we find a rather unstable, time-variant exposure of German stock market companies. Dollar sensitivity is positively affected by the ratio of exports/ gross domestic product (GDP) and negatively affected by imports/GDP. Moreover, as expected from theoretical findings, firm values and exchange rate exposure are significantly reduced by adjustment costs depending on the distance of the exchange rate from the expected long-run mean.

scholarly journals INVESTING THE PRICING OF EXCHANGE RATE RISK IN THE STOCK MARKET: EVIDENCE FROM PAKISTAN STOCK MARKET

2016 ◽  
Vol 12 (2) ◽  
Author(s):  
Muhammad Tariq ◽  
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Term Structure ◽  
Discount Rate ◽  
Risk Premium ◽  
Foreign Currency ◽  
Stock Exchange ◽  
Exchange Rate Risk ◽  
Rate Risk ◽  
Currency Exposure

Objective: This paper is designed to empirically examine the pricing of exchange rate risk in the stock market in Pakistan. Methodology: The study is based on two-factor and multi-factor arbitrage pricing models. The empirical evidences are based on 15 years monthly data from January 1998 to December 2015, for exchange rate, discount rate, inflation, t bill and the Karachi Stock Exchange (KSE) 100 indexes is collected from State Bank of Pakistan and Karachi Stock Exchange. Results: The results, however, conclude that the exchange rate risk is priced in the stock market. Whereas, the remaining factors such as risk premium attached to foreign currency exposure and the term structure of discount rate appear to have significant effect on exchange rate risk. We can generalize that the exchange market in Pakistan are influenced by the stock market. Policy implication: This paper provides empirical evidence that the risk exposure of exchange rate is largely influenced by the changes in stock market. Therefore, the concerned persons are proposed for the consideration of this issue.

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