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The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APT-modelling

Entorf, Horst and Jamin, Gösta (2003):
The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APT-modelling.
Darmstadt, In: Darmstadt Discussion Papers in Economics, [Online-Edition: http://econstor.eu/bitstream/10419/84865/1/ddpie_127.pdf],
[Report]

Abstract

We estimate the impact of dollar changes on the value of German DAX corporations, using APT-modelling for the period 1977 - 1995. Several macroeconomic risk factors, including the dollar and a residual market factor representing the general market risk, are specified. The general notion is that the export-oriented German companies should benefit from increasing dollar values. We find time-varying dollar exposure presumably depending on the prevailing trade regime. Dollar sensitivity is positive as expected in periods with a positive trade balance, whereas it turns negative in periods with a negative trade balance (e.g., in the first half of the 1980s). APT-modelling simultaneously considers exchange rate exposure and risk-premia of macroeconomic risk factors, the latter also being unstable over time.

Item Type: Report
Erschienen: 2003
Creators: Entorf, Horst and Jamin, Gösta
Title: The dollar and the German stock market: determination of exposure to and pricing of exchange rate risk using APT-modelling
Language: English
Abstract:

We estimate the impact of dollar changes on the value of German DAX corporations, using APT-modelling for the period 1977 - 1995. Several macroeconomic risk factors, including the dollar and a residual market factor representing the general market risk, are specified. The general notion is that the export-oriented German companies should benefit from increasing dollar values. We find time-varying dollar exposure presumably depending on the prevailing trade regime. Dollar sensitivity is positive as expected in periods with a positive trade balance, whereas it turns negative in periods with a negative trade balance (e.g., in the first half of the 1980s). APT-modelling simultaneously considers exchange rate exposure and risk-premia of macroeconomic risk factors, the latter also being unstable over time.

Series Name: Darmstadt Discussion Papers in Economics
Volume: 127
Place of Publication: Darmstadt
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
Date Deposited: 20 Nov 2008 08:16
Official URL: http://econstor.eu/bitstream/10419/84865/1/ddpie_127.pdf
Additional Information:

JEL classification: F31, G12

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