An analysis of asymmetry in foreign currency exposure of the Australian equities market

Amalia Di Iorio*, Robert Faff

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

52 Citations (Scopus)

Abstract

Using both daily and monthly data, the authors: (a) analyse the extra-market component of foreign exchange exposure of the Australian equities market using the Australian/US exchange rate factor return in an augmented market model; and (b) use a dummy variable specification to model the potential asymmetric effect induced by non-linear hedging strategies, such as using currency options, for the period 1988-1996. Overall, the results are mixed. The following are found: (i) stronger evidence of foreign exchange exposure in the analysis employing daily data; (ii) when using daily data, a stronger lagged response than a contemporaneous response is observed; (iii) some evidence of asymmetry; and (iv) evidence of significant exchange rate exposures of the predicted sign in several industries. Further, the findings using monthly data are less significant than those using daily data.

Original languageEnglish
Pages (from-to)133-159
Number of pages27
JournalJournal of Multinational Financial Management
Volume10
Issue number2
DOIs
Publication statusPublished - Jun 2000
Externally publishedYes

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