Exchange Rate Shocks and International Industrial Competition: an Investigation on the Impact of Euro

• Main Authors: Chung-Hsing Chou, 周中行
• Other Authors: Chin-Wen Hsin
• Format: Others
• Language: en_US
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/03239540940089310042

碩士 === 元智大學 === 財務金融研究所 === 92 === This study examines the international industry effect of European equity markets by measuring the influence of industry excess returns of Germany, a major country joining the Euro, and the U.K., a country outside the Euro zone, on the corresponding returns of sample European countries while considering the impact of exchange rate shocks. Particular emphasis is addressed on the changes possibly introduced by the Euro system. Consistent with previous studies, exchange rate risk is not found to be a prevailing factor in pricing equities. In contrast, significant industry effects have been observed across markets. Particularly, German industries demonstrate greater influence on European countries, joined Euro or not, than the U.K. industries assert. Since the birth of Euro in 1999, more pronounced industry common effects are observed from both German and UK industries even though the importance of exchange rate shocks remains insignificant. The evidence does not indicate differences in this structural change between Euro-zone and none-Euro-zone countries, suggesting that the European market integration since 1999 may not be all attributed to the introduction of the Euro system. Keywords: industry effect; exchange rate risk; Euro