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Essays on International Asset Management: Evidence for Developed West and Emerging East

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Marina Nikiforow

Asset management is a global business, spreading from developed financial centers to emerging and transition markets. Empirical analyses of professional investors’ investment processes are justified not only by their key role in the traditional finance theory, as rational agents contributing to market efficiency, but also by the behavioral finance, finding evidence on irrational biases in their investment behavior. This study provides survey evidence on views and investment behavior of 772 fund managers from 274 investment companies in the USA, Germany, Thailand, Russia and Ukraine. New insights are gained on the persistency of behavioral biases. Cross-country comparisons shed light on fund managers’ information processing and investment behavior in different institutional market settings.

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6. Exchange rate exposure of Central and Eastern European exporting firms 117

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6. Exchange rate exposure of Central and Eastern European exporting firms78 6.1 Introduction The exchange rate exposure of firms, i.e. the sensitivity of firms’ stock returns to fluctuations in foreign exchange rates, has been widely discussed since the end of the Bretton Woods system. Theoretical research, such as e.g. by Bodnar et al. (2002), underpins its importance for a firm’s value by identifying various channels through which exchange rate shocks are assumed to affect a firm’s profitability. Hence, from this perspective, a firm’s foreign exchange exposure should be thought relevant not only for risk management decisions of corporate managers, but also for international investors who seek to hedge their portfolio. Finally, it should also be of interest for policy makers who have to decide about the appropriate exchange rate arrangement for a country. However, the empirical evidence on the theoretically suggested relevance of the exposure is mixed at best (Bodnar and Wong, 2003, He and Ng, 1998, see also Muller and Verschoor, 2006a). Our study sheds light on the exchange rate exposure of exporting firms in the four transition markets Russia, Czech Republic, Hungary, and Poland. Transition markets have been least focused for this analysis so far. Most of empirical work is on Western industrialized economies (see e.g. Chamberlain et al., 1997, Glaum, 2000), where the exposure is found to be rather modest. However, empirical results suggest that exchange rate exposure seems to be higher in emerging economies: Kiymaz (2003) for example finds that the comparatively high share of 50%...

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