Can hedging tell the full story? Reconciling differences in United States aggregate- and industry-level exchange rate risk premium

• 成果类型: Article
• 署名作者: Francis, Bill B.; Hasan, Iftekhar; Hunter, Delroy M.
• 署名单位: Rensselaer Polytechnic Institute; Bank of Finland; State University System of Florida; University of South Florida
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.10.007
• 发表日期: 2008
• 页码: 169-196
• 关键词: exposure; Currency risk premium; Cost of equity; Industry competition; International asset pricing

摘要

While the importance of currency movements to industry competitiveness is theoretically well established, there is little evidence that Currency risk impacts US industries. Applying a conditional asset pricing model to 36 US industries, we find that all industries have a Significant Currency premium that adds about 2.47 percentage points to the cost of equity and accounts for approximately 11.7% of total risk premium in absolute Value. Cross-industry Variation in the Currency premium is explained by foreign income, industry competitiveness, leverage, liquidity, and other industry characteristics, while its time variation is explained by US aggregate foreign trade, monetary Policy, growth Opportunities, and other macro variables. The results indicate that methodological weakness, not hedging, explains the insignificant industry currency risk premium found in previous work, thus resolving the puzzle that currency risk premium is important at the aggregate stock market level, but not at the industry level. (C) 2008 Elsevier B.V. All rights reserved.