The Impact of Unanticipated Exchange Rate on Stock Return and Volatility

• Main Authors: Chen Chi-Sen, 陳其森
• Other Authors: Chen Shen-Yuan
• Format: Others
• Language: zh-TW
• Published: 1999
• Online Access: http://ndltd.ncl.edu.tw/handle/27747167875911938848

碩士 === 銘傳大學 === 金融研究所 === 87 === This paper examines the short-term phenomena in Taiwan stock market after the Asia financial crisis arose in 1997. The empirical studies focus on the impact of unanticipated exchange rate on stock return and volatility during the period of volatile exchange rate movement. The main empirical findings are as below. 1. Consistent with previous researches, we find a low proportion of firms experience significant exchange rate risk to insignificant. About 22 percent of exporting firms and 14 percent of importing firms are exposed to significant exchange rate risk. In addition, the percentage of exporting firms with positive exchange rate risk coefficient is larger than that of importing ones. However, no lagged exchange rate risk effects exist. 2. The exchange rate risk which firms are exposed to is determined by individual firm’s operational factors such as exporting ratio and firm size. But because of the imperfection of Taiwan derivatives market, the hedging factors have no significant influence on exchange rate risk. 3. We find significant increases in stock return volatility after Asia financial crisis both in exporting and importing sample even though there are only few firms experience significant exchange rate risk. The fact that stock return volatility totally increase may result from other economic factors that are influenced by financial crisis rather than exchange rate itself. 4. The increase in stock return volatility of exporting firms is larger than that of importing firms. Exporting firms are exposed to larger exchange risk than importing firms.