Exchange Rate Risk and the Equity Performance of Financial Intermediaries
Gounopoulos, D (2013) Exchange Rate Risk and the Equity Performance of Financial Intermediaries In: Financial Management, October 2011, U.S.A..
Available under License : See the attached licence file.
This study uses the VAR-BEKK methodology to examine the relationship between equity returns and currency exposure for a sample of U.S., U.K. and Japanese banks and insurance firms during 2003–2011. The findings indicate that banks' equity returns are negatively related to changes in foreign currency value during the recent financial crisis (2008–2011). That is, the U.S. (Japanese) banking sector returns are negatively correlated to changes in the Japanese Yen (U.S. Dollar). Equity returns of U.S./U.K. insurers are negatively linked to changes in the value of Japanese Yen, and this relationship is accentuated during the crisis. Home currency exposure is not significant for any insurer. When size is taken into account, only small U.S. banks are exposed to home currency changes, while only large Japanese banks are exposed to foreign currency changes. Overall, the negative relationship between the foreign currency value and bank/insurance equity returns supports the “flight to quality” hypothesis from the U.S./U.K. to Japan.
|Item Type:||Conference or Workshop Item (Conference Paper)|
|Divisions :||Faculty of Arts and Social Sciences > Surrey Business School|
|Date :||September 2013|
|Identification Number :||https://doi.org/10.1016/j.irfa.2012.04.001|
|Additional Information :||Crown copyright © 2012 Published by Elsevier Inc. All rights reserved.|
|Depositing User :||Symplectic Elements|
|Date Deposited :||22 Dec 2015 12:37|
|Last Modified :||22 Dec 2015 12:37|
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