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Time-varying betas of sectoral returns to market returns and exchange rate movements
Jönköping university, Sweden.
Jönköping university, Sweden.
2013 (English)In: Applied Financial Economics, ISSN 0960-3107, E-ISSN 1466-4305, Vol. 23, no 14, p. 1155-1168Article in journal (Refereed) 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.

Place, publisher, year, edition, pages
2013. Vol. 23, no 14, p. 1155-1168
Keywords [en]
exchange rates risk, time-varying beta, Kalman filter, sectoral returns
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-41670DOI: 10.1080/09603107.2013.797555OAI: oai:DiVA.org:lnu-41670DiVA, id: diva2:800258
Available from: 2015-04-02 Created: 2015-04-02 Last updated: 2019-08-30Bibliographically approved
In thesis
1. Dynamics of macroeconomic and financial variables in different time horizons
Open this publication in new window or tab >>Dynamics of macroeconomic and financial variables in different time horizons
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
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.

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.

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.

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.

Place, publisher, year, edition, pages
Jönköping: Jönköping International Business School, Jönköping University, 2012. p. 48
Series
JIBS Dissertations Series, ISSN 1403-0470 ; 077
National Category
Economics
Research subject
Economy, Economics
Identifiers
urn:nbn:se:lnu:diva-78458 (URN)978-91-86345-29-7 (ISBN)
Public defence
2012-04-13, 10:00 (English)
Opponent
Supervisors
Available from: 2018-10-25 Created: 2018-10-24 Last updated: 2019-08-30Bibliographically approved

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Karlsson, Hyunjoo Kim

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