Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?

Research output: Contribution to conferencePaperResearchpeer-review

Standard

Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach? / Aabo, Tom; Brodin, Danielle.

2009. Paper presented at Sixteenth Annual Conference of the Multinational Finance Society, Rethymno, Kreta, Greece.

Research output: Contribution to conferencePaperResearchpeer-review

Harvard

Aabo, T & Brodin, D 2009, 'Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?', Paper presented at Sixteenth Annual Conference of the Multinational Finance Society, Rethymno, Kreta, Greece, 28/06/2009 - 01/07/2009.

APA

Aabo, T., & Brodin, D. (2009). Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?. Paper presented at Sixteenth Annual Conference of the Multinational Finance Society, Rethymno, Kreta, Greece.

CBE

Aabo T, Brodin D. 2009. Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?. Paper presented at Sixteenth Annual Conference of the Multinational Finance Society, Rethymno, Kreta, Greece.

MLA

Aabo, Tom and Danielle Brodin Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?. Sixteenth Annual Conference of the Multinational Finance Society, 28 Jun 2009, Rethymno, Kreta, Greece, Paper, 2009.

Vancouver

Aabo T, Brodin D. Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?. 2009. Paper presented at Sixteenth Annual Conference of the Multinational Finance Society, Rethymno, Kreta, Greece.

Author

Aabo, Tom ; Brodin, Danielle. / Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?. Paper presented at Sixteenth Annual Conference of the Multinational Finance Society, Rethymno, Kreta, Greece.

Bibtex

@conference{483b5b30235711de95c8000ea68e967b,
title = "Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?",
abstract = "This study examines the sensitivity of detected exchange rate exposures at the firm specific level to changes in methodological choices using a traditional two factor stock market approach for exposure quantification. We primarily focus on two methodological choices: the choice of market index and the choice of observation frequency. We investigate to which extent the detected exchange rate exposures for a given firm can be confirmed when the choice of market index and/or the choice of observation frequency are changed. Applying our sensitivity analysis to Scandinavian non-financial firms, we find aggregate results that are in line with previous studies for small, open economies. However, our main contribution to the existing literature is on the firm specific level where we find a very high defection rate when trying to confirm results from one methodological approach to another. More specifically we find that only one of five detected exchange rate exposures is confirmed when we move from an approach using weekly data to an approach using monthly data. This result is surprising since 1) the aggregate result shows that the number of detected exposures using monthly data is approximately two thirds of the number of detected exposures using weekly data and 2) there is no economic rationale that the detected exposures at the firm-specific level should change when going from the use of weekly data to the use of monthly data. In relation to a change in the choice of market index, we find that one of two detected exposures is confirmed by all variations of market indexes applied. Although the choice of market index involves a high defection rate this is at least partly in accordance with economic rationale since we are dealing with extra-market exchange rate exposures. The results of the study are important because corporate managers, stock analysts and stock pickers are primarily interested in the sensitivity - and thus reliability - of detected exchange rate exposures for a specific firm rather than for an industry or a country as a whole.",
author = "Tom Aabo and Danielle Brodin",
note = "Artiklen haves i ringbind p{\aa} L{\ae}sesalen - Research@asb; null ; Conference date: 28-06-2009 Through 01-07-2009",
year = "2009",
language = "English",

}

RIS

TY - CONF

T1 - Can the CFO Trust the FX Exposure Quantification from a Stock Market Approach?

AU - Aabo, Tom

AU - Brodin, Danielle

N1 - Artiklen haves i ringbind på Læsesalen - Research@asb

PY - 2009

Y1 - 2009

N2 - This study examines the sensitivity of detected exchange rate exposures at the firm specific level to changes in methodological choices using a traditional two factor stock market approach for exposure quantification. We primarily focus on two methodological choices: the choice of market index and the choice of observation frequency. We investigate to which extent the detected exchange rate exposures for a given firm can be confirmed when the choice of market index and/or the choice of observation frequency are changed. Applying our sensitivity analysis to Scandinavian non-financial firms, we find aggregate results that are in line with previous studies for small, open economies. However, our main contribution to the existing literature is on the firm specific level where we find a very high defection rate when trying to confirm results from one methodological approach to another. More specifically we find that only one of five detected exchange rate exposures is confirmed when we move from an approach using weekly data to an approach using monthly data. This result is surprising since 1) the aggregate result shows that the number of detected exposures using monthly data is approximately two thirds of the number of detected exposures using weekly data and 2) there is no economic rationale that the detected exposures at the firm-specific level should change when going from the use of weekly data to the use of monthly data. In relation to a change in the choice of market index, we find that one of two detected exposures is confirmed by all variations of market indexes applied. Although the choice of market index involves a high defection rate this is at least partly in accordance with economic rationale since we are dealing with extra-market exchange rate exposures. The results of the study are important because corporate managers, stock analysts and stock pickers are primarily interested in the sensitivity - and thus reliability - of detected exchange rate exposures for a specific firm rather than for an industry or a country as a whole.

AB - This study examines the sensitivity of detected exchange rate exposures at the firm specific level to changes in methodological choices using a traditional two factor stock market approach for exposure quantification. We primarily focus on two methodological choices: the choice of market index and the choice of observation frequency. We investigate to which extent the detected exchange rate exposures for a given firm can be confirmed when the choice of market index and/or the choice of observation frequency are changed. Applying our sensitivity analysis to Scandinavian non-financial firms, we find aggregate results that are in line with previous studies for small, open economies. However, our main contribution to the existing literature is on the firm specific level where we find a very high defection rate when trying to confirm results from one methodological approach to another. More specifically we find that only one of five detected exchange rate exposures is confirmed when we move from an approach using weekly data to an approach using monthly data. This result is surprising since 1) the aggregate result shows that the number of detected exposures using monthly data is approximately two thirds of the number of detected exposures using weekly data and 2) there is no economic rationale that the detected exposures at the firm-specific level should change when going from the use of weekly data to the use of monthly data. In relation to a change in the choice of market index, we find that one of two detected exposures is confirmed by all variations of market indexes applied. Although the choice of market index involves a high defection rate this is at least partly in accordance with economic rationale since we are dealing with extra-market exchange rate exposures. The results of the study are important because corporate managers, stock analysts and stock pickers are primarily interested in the sensitivity - and thus reliability - of detected exchange rate exposures for a specific firm rather than for an industry or a country as a whole.

M3 - Paper

Y2 - 28 June 2009 through 1 July 2009

ER -