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Time-varying betas of sectoral returns to market returns and exchange rate movements
Högskolan i Jönköping, Internationella Handelshögskolan, IHH, Economics, Finance and Statistics.
Högskolan i Jönköping, Internationella Handelshögskolan, IHH, Economics, Finance and Statistics.
2013 (Engelska)Ingår i: Applied Financial Economics, ISSN 0960-3107, E-ISSN 1466-4305, Vol. 23, nr 14, s. 1155-1168Artikel i tidskrift (Refereegranskat) Published
Abstract [en]

The time-varying behaviour of the market and exchange risk betas of the US sectoral returns are estimated using a random walk process in connection with the Kalman filter. The empirical findings, in general, show that the market risks tend to shrink over longer time horizons, and that during the dot-com bubble burst and during the subprime financial crisis they tended to rise. During these crises they rose most notably in those industries most related to the crisis. Regarding exchange risk, industry returns appear in this study to be positively related to dollar appreciation, but that relationship declines with longer time horizons, in some cases resulting ultimately in a negative relationship between the US dollar and the industry returns. This latter result is consistent with the idea that the effect of a US dollar appreciation on competitiveness of the US exports becomes stronger with the longer time horizons. During the subprime financial crisis, the relation between excess returns and the exchange rate tended to fall, as was notably the case for the Technology sector during the dot-com bubble burst.

Ort, förlag, år, upplaga, sidor
Taylor & Francis, 2013. Vol. 23, nr 14, s. 1155-1168
Nyckelord [en]
exchange rates risk, time-varying beta, Kalman filter, sectoral returns
Nationell ämneskategori
Nationalekonomi
Identifikatorer
URN: urn:nbn:se:hj:diva-17941DOI: 10.1080/09603107.2013.797555Scopus ID: 2-s2.0-84878118163OAI: oai:DiVA.org:hj-17941DiVA, id: diva2:516067
Tillgänglig från: 2012-04-17 Skapad: 2012-04-17 Senast uppdaterad: 2019-02-25Bibliografiskt granskad
Ingår i avhandling
1. Dynamics of macroeconomic and financial variables in different time horizons
Öppna denna publikation i ny flik eller fönster >>Dynamics of macroeconomic and financial variables in different time horizons
2012 (Engelska)Doktorsavhandling, sammanläggning (Övrigt vetenskapligt)
Abstract [en]

This dissertation consists of an introductory chapter and four papers dealing with financial issues of open economies, which can be in two broad categorizations: 1) exchange rate movements and 2) stock market interdependence. The first paper covers how the exchange rate changes affect the prices of internationally traded goods. With the variables (the price of exports in exporters’ currency and the exchange rate, both of which are in logarithmic form) being cointegrated, a model with both long- and short-run characteristics (the Error Correction Model, ECM) is formulated. By using prices of major exports from South Korea to different destinations over the world, how the markup adjustment of those exports varies with respect to changes in exchange rates is estimated empirically under the context of pricing-to-market (PTM).

The second paper relates to the standard macroeconomic models of exchange rate determination. This paper investigates the relationship between the exchange rate and the domestic-foreign interest rate differential. The associated regression model follows the form of earlier literature in testing the effect of the interest rate differential on the exchange rate although the use of wavelet-decomposed levels of the data series distinguishes this paper from the earlier empirical works.

A relevant issue associated with the relationship between export prices and exchange rates for different industries is found in the third paper. The responsiveness of firms’ profitability to changes in exchange rates (i.e. exchange rate exposure) is tested using a factor model. Following specifications of the earlier literature on this subject, returns of various industries (or sectors) of the US stock market are regressed on the changes in exchange rates as well as the excess return on the market portfolio. The Kalman filter is used to estimate time-varying coefficients (beta) of the variables at different frequencies (daily, weekly, monthly, quarterly and annually).

After the three papers noted above, the dissertation moves on to the final paper which explores the relationship between national stock markets (i.e. interdependence). The causal linkages of the U.S. stock market to each of six eastern Asian national stock markets (China, Hong Kong, Japan, Singapore, South Korea and Taiwan) as well as the causal linkages among those Asian equity markets are tested in a vector autoregression (VAR) model using wavelet-decomposed data.

Ort, förlag, år, upplaga, sidor
Jönköping: Jönköping International Business School, 2012. s. 183
Serie
JIBS Dissertation Series, ISSN 1403-0470 ; 77
Nationell ämneskategori
Nationalekonomi
Identifikatorer
urn:nbn:se:hj:diva-17943 (URN)978-91-86345-29-7 (ISBN)
Opponent
Handledare
Tillgänglig från: 2012-04-17 Skapad: 2012-04-17 Senast uppdaterad: 2012-04-17Bibliografiskt granskad

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