The First and Second Moment Foreign Exchange Rate Exposure of Main Foreign Currencies for Taiwan Stock Returns

• Main Authors: Chia-Ting Liu, 劉家婷
• Other Authors: Min-Jiun Su
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/02341207214116902079

碩士 === 國立中興大學 === 企業管理學系所 === 95 === The impact of exchange rate risk on stock returns has received considerable attention in the academic literature. Previous researches which examined exchange rate changes have concentrated solely on the first moment, ignoring the second moments, whereas this thesis paper mainly hopes to combine the first and second moment exchange rate exposure that analyze the effect of the ecchange rate changes of main currencies on Taiwan stock returns. This research uses Dynamic Single Factor Model to build a coincident index returns, through the cumulative dynamic multipliers, the important currencies are USD and HKD. Furthermore, this research uses two-step ARCH model to estimate the first and second moment foreign exchange rate exposure of main foreign currencies for Taiwan stock returns. In the first step, this thesis paper mainly evaluates ARCH model of the main currencies exchange rate returns, through the estimated error of mean and variance equation, unexpected changes in the exchange rates（St）and associated conditional variances（Hst）are estimated. In the second step, the estimated values for St and Hst are integrated with Taiwan stock returns in ARCH model, through estimated regressive coefficients of mean equation of St and Hst, the first and the second moment exchange rate exposure for Taiwan stock returns are acquired. In 12.50% of this study which detect significant first moment exposure when contemporaneous USD and HKD are used. When the model utilizes one-day lags, 87.5% of this study are significant and 64.29% are asymmetric. Regard second moment exposure, in this study which detect no significant exposure when USD and HKD are used. In the model of one day lags, 43.75% of this study are significant.