The foreign exchange exposure of Japanese multinational corporations
Article Abstract:
We find that about 25 percent of our sample of 171 Japanese multinationals' stock returns experienced economically significant positive exposure effects for the period January 1979 to December 1993. The extent to which a firm is exposed to exchange-rate fluctuations can be explained by the level of its export ratio and by variables that are proxies for its hedging needs. Highly leveraged firms, or firms with low liquidity, tend to have smaller exposures. Foreign exposure is found to increase with firm size. We also find that keiretsu multinationals are more exposed to exchange-rate risk than nonkeiretsu firms. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1998
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Optimal hedging under intertemporally dependent preferences
Article Abstract:
This paper examines optimal hedging behavior in a market where preferences for current consumption are partly determined by the consumer's past consumption history. The model considers an individual exposed to price risk, who allocates wealth between consumption and futures contracts over a (continuous-time) finite planning horizon. The speculative component of the hedge ratio is shown to be smaller and the consumption path smoother than in models where preferences are separable over time. Some comparative-static properties of the hedge ratio are also examined. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1990
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